Safe and Sound

The First State Bank

Louise, TX
5
Star Rating
Louise, TX-based The First State Bank is an FDIC-insured bank started in 1956. Regulatory filings show the bank having equity of $34.9 million on $406.9 million in assets, as of December 31, 2017.

U.S. bank customers have $369.4 million on deposit at 10 offices in TX run by 110 full-time employees. With that footprint, the bank has amassed loans and leases worth $272.0 million, including real estate loans of $166.3 million.

Overall, Bankrate believes that, as of December 31, 2017, The First State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is valuable. It acts as a cushion against losses and as protection for accountholders during periods of financial instability for the bank. From a safety and soundness perspective, more capital is better.

The First State Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than 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 11.69 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, The First State Bank held equity amounting to 8.57 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

A bank with large numbers of these types of assets may eventually be required to use capital to cover losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.09 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 to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. The First State Bank's loan loss allowance was 1,455.43 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. Conversely, losses diminish a bank's ability to do those things.

The First State Bank scored 30 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important measure of a bank's earnings. The First State Bank's most recent annualized quarterly return on equity was 21.39 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $7.4 million on total equity of $34.9 million. The bank had an annualized return on average assets, or ROA, of 1.92 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.