Safe and Sound

City State Bank

Norwalk, IA
5
Star Rating
City State Bank is a Norwalk, IA-based, FDIC-insured bank dating back to 1895. As of December 31, 2017, the bank had equity of $32.8 million on assets of $371.8 million.

With 80 full-time employees in 9 offices in IA, the bank has amassed loans and leases worth $275.4 million, including real estate loans of $233.3 million. U.S. bank customers currently have $326.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, City State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three important 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

Capital acts as a buffer against losses and as protection for depositors during times of financial instability for the bank. It follows then that a bank's level of capital is an essential measurement of an institution's financial strength. From a safety and soundness perspective, more capital is preferred.

City State Bank came in below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. City State Bank's Tier 1 capital ratio was 10.71 percent, exceeding 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 stand up to economic headwinds.

Overall, City State Bank held equity amounting to 8.81 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets means a bank could have to use capital to cover losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

City State Bank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.12 percent of City 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 handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on City State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, City State Bank scored 24 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for City State Bank was 15.03 percent, above the national average of 8.10 percent.

The bank reported net income of $4.7 million on total equity of $32.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.31 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.