Safe and Sound

Audubon State Bank

Audubon, IA
4
Star Rating
Audubon, IA-based Audubon State Bank is an FDIC-insured bank started in 1876. As of December 31, 2017, the bank held equity of $13.4 million on $114.2 million in assets.

U.S. bank customers have $96.6 million on deposit at 2 offices in IA run by 16 full-time employees. With that footprint, the bank has amassed loans and leases worth $87.3 million, including real estate loans of $48.7 million.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for depositors during times of financial instability for the bank. It follows then that when it comes to measuring an a bank's financial fortitude, capital is important. From a safety and soundness perspective, the higher the capital, the better.

Audubon State Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Audubon State Bank's Tier 1 capital ratio was 12.06 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Audubon State Bank held equity amounting to 11.77 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these types of assets could eventually be required to use capital to cover 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 money, pushing down earnings and increasing the risk of a failure in the future.

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

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, none of Audubon 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Audubon State Bank's loan loss allowance in its most recent filings.

Earnings score

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

Audubon State Bank scored 18 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. Audubon State Bank's most recent annualized quarterly return on equity was 10.56 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.3 million on total equity of $13.4 million. The bank had an annualized return on average assets, or ROA, of 1.18 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.