Safe and Sound

American State Bank

Osceola, IA
5
Star Rating
American State Bank is an Osceola, IA-based, FDIC-insured bank started in 1987. The bank has equity of $18.9 million on $201.4 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $164.2 million on deposit at 4 offices in IA run by 38 full-time employees. With that footprint, the bank currently holds loans and leases worth $143.1 million, including $81.6 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, American 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 major criteria Bankrate used to grade American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial strength, capital is useful. When looking at safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, American State Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. American State Bank's Tier 1 capital ratio was 12.43 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, American State Bank held equity amounting to 9.40 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due mortgages.

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to absorb losses, decreasing 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, pushing down earnings and increasing the risk of a failure in the future.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.19 percent of American 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 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 at-risk loans. Unfortunately, the FDIC did not provide information on American State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, American State Bank scored 28 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for American State Bank was 20.42 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.7 million on total equity of $18.9 million. The bank experienced an annualized return on average assets, or ROA, of 1.89 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.