Safe and Sound

Interstate Federal Savings and Loan Association of McGregor

Mcgregor, IA
5
Star Rating
Interstate Federal Savings and Loan Association of McGregor is a Mcgregor, IA-based, FDIC-insured bank that opened its doors in 1935. The bank has equity of $1.7 million on $8.0 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 2 full-time employees, the bank holds loans and leases worth $5.8 million, including real estate loans of $5.9 million. U.S. bank customers currently have $6.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Interstate Federal Savings and Loan Association of McGregor exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to grade 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 affords protection for depositors when a bank is experiencing financial trouble. Therefore, a bank's level of capital is an essential measurement of a bank's financial resilience. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Interstate Federal Savings and Loan Association of McGregor achieved a score of 30 out of a possible 30 points, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Interstate Federal Savings and Loan Association of McGregor's Tier 1 capital ratio was 52.74 percent, exceeding the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, Interstate Federal Savings and Loan Association of McGregor held equity amounting to 21.64 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

A bank with a large number of these types of assets could eventually have to use capital to absorb losses, reducing its equity buffer. 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.

On Bankrate's asset quality test, Interstate Federal Savings and Loan Association of McGregor scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, none of Interstate Federal Savings and Loan Association of McGregor'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." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Interstate Federal Savings and Loan Association of McGregor's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Conversely, losses take away from a bank's ability to do those things.

Interstate Federal Savings and Loan Association of McGregor scored 4 out of a possible 30 on Bankrate's test of earnings, coming in below the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Interstate Federal Savings and Loan Association of McGregor was 1.51 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $26,000 on total equity of $1.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.33 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.