Safe and Sound

The First State Bank

Columbus, TX
4
Star Rating
Columbus, TX-based The First State Bank is an FDIC-insured bank founded in 1913. The bank holds equity of $18.7 million on $141.0 million in assets, according to December 31, 2017, regulatory filings.

With 19 full-time employees, the bank currently holds loans and leases worth $28.4 million, including real estate loans of $18.0 million. U.S. bank customers currently have $121.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to score U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors during periods of financial trouble for the bank. It follows then that a bank's level of capital is a key measurement of an institution's financial strength. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, The First State Bank racked up 18 out of a possible 30 points, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First State Bank's Tier 1 capital ratio was 34.08 percent, above the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial challenges.

Overall, The First State Bank held equity amounting to 13.24 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due mortgages.

Having extensive holdings of these types of assets may eventually force a bank to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the chances of a future failure.

The First State Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.71 percent of The First State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The First State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

The First State Bank fell behind the national average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The First State Bank's most recent annualized quarterly return on equity was 3.64 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $686,000 on total equity of $18.7 million. The bank had an annualized return on average assets, or ROA, of 0.47 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.