Safe and Sound

American Bank

Allentown, PA
Star Rating
Allentown, PA-based American Bank is an FDIC-insured bank started in 1997. The bank has equity of $60.4 million on assets of $574.1 million, according to June 30, 2017, regulatory filings.

Thanks to the efforts of 58 full-time employees, the bank has amassed loans and leases worth $432.6 million, $384.6 million of which are for real estate. U.S. bank customers currently have $423.1 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, American Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank faired on the three important criteria Bankrate used to score U.S. banks on safety and soundness.


Find out


Capital Score

Capital acts as a cushion against losses and as protection for accountholders when a bank is experiencing financial instability. Therefore, when it comes to measuring an an institution's financial fortitude, capital is key. When it comes to safety and soundness, the higher the capital, the better.
On our test to measure capital adequacy, American Bank received a score of 12 out of a possible 30 points, coming in below the national average of 13.38.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. American Bank's Tier 1 capital ratio was 11.34 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather economic difficulties.

Overall, American Bank held equity amounting to 10.51 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these kinds of assets may eventually be forced to use capital to absorb losses, cutting down on its equity cushion. 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 reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, American Bank scored 40 out of a possible 40 points, beating the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 0.03 percent of American 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 1.04 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. American Bank's loan loss allowance was 5,432.14 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

American Bank exceeded the national average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for American Bank was 9.31 percent, above the national average of 9.28 percent.

The bank recorded net income of $2.8 million on total equity of $60.4 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 0.98 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?'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 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.