Safe and Sound

The Roscoe State Bank

Roscoe, TX
5
Star Rating
Started in 1906, The Roscoe State Bank is an FDIC-insured bank based in Roscoe, TX. Regulatory filings show the bank having equity of $16.1 million on assets of $157.6 million, as of December 31, 2017.

U.S. bank customers have $141.3 million on deposit at 3 offices in TX run by 38 full-time employees. With that footprint, the bank holds loans and leases worth $76.4 million, including $50.9 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, The Roscoe State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to evaluate 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 strength, capital is crucial. It works as a buffer against losses and as protection for accountholders when a bank is experiencing economic trouble. From a safety and soundness perspective, more capital is preferred.

The Roscoe State Bank finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 12 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The Roscoe State Bank's Tier 1 capital ratio was 16.92 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, The Roscoe State Bank held equity amounting to 10.24 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate 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 loans.

A bank with lots of these types of assets may eventually have to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the risk of a future failure.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.13 percent of The Roscoe State Bank's loans were noncurrent -- in other words, 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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. The Roscoe State Bank's loan loss allowance was 1,225.74 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

The Roscoe State Bank outperformed the average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The Roscoe State Bank's most recent annualized quarterly return on equity was 8.76 percent, above the national average of 8.10 percent.

The bank earned net income of $1.4 million on total equity of $16.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.94 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.