Safe and Sound

Denver Savings Bank

Denver, IA
4
Star Rating
Denver Savings Bank is a Denver, IA-based, FDIC-insured bank dating back to 1902. Regulatory filings show the bank having equity of $16.6 million on $172.4 million in assets, as of December 31, 2017.

Thanks to the work of 25 full-time employees in 2 offices in IA, the bank currently holds loans and leases worth $114.7 million, $95.5 million of which are for real estate. The bank currently holds $149.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Denver Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders when a bank is experiencing economic trouble. It follows then that when it comes to measuring an an institution's financial fortitude, capital is valuable. When it comes to safety and soundness, the higher the capital, the better.

Denver Savings Bank finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. Denver Savings Bank's Tier 1 capital ratio was 11.02 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial challenges.

Overall, Denver Savings Bank held equity amounting to 9.61 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

Having large numbers 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 interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

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

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, 0.04 percent of Denver Savings 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." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Denver Savings Bank's loan loss allowance was 2,438.78 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, take away from a bank's ability to do those things.

Denver Savings Bank scored 10 out of a possible 30 on Bankrate's test of earnings, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Denver Savings Bank's most recent annualized quarterly return on equity was 4.94 percent, below the national average of 8.10 percent.

The bank reported net income of $806,000 on total equity of $16.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.48 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.