Safe and Sound

Iowa Prairie Bank

Brunsville, IA
4
Star Rating
Iowa Prairie Bank is an FDIC-insured bank founded in 1929 and currently based in Brunsville, IA. The bank holds equity of $5.5 million on $64.8 million in assets, according to December 31, 2017, regulatory filings.

With 16 full-time employees in 3 offices in IA, the bank holds loans and leases worth $33.9 million, including real estate loans of $14.6 million. U.S. bank customers currently have $57.2 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is important. It acts as a bulwark against losses and provides protection for depositors during periods of financial trouble for the bank. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Iowa Prairie Bank received a score of 8 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Iowa Prairie Bank's Tier 1 capital ratio was 13.03 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Iowa Prairie Bank held equity amounting to 8.43 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 kinds of assets could eventually be forced to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

Iowa Prairie Bank came in below the national average of 37.49 on Bankrate's asset quality test, racking up 28 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.66 percent of Iowa Prairie Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Iowa Prairie 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. 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 financial shocks. Obviously, banks that are losing money are less able to do those things.

Iowa Prairie Bank outperformed the average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

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 Iowa Prairie Bank was 10.09 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $563,000 on total equity of $5.5 million. The bank reported an annualized return on average assets, or ROA, of 0.83 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.