Safe and Sound

Iowa State Bank

Sac City, IA
5
Star Rating
Iowa State Bank is an FDIC-insured bank founded in 1926 and currently based in Sac City, IA. As of December 31, 2017, the bank held equity of $15.0 million on $123.1 million in assets.

With 22 full-time employees in 3 offices in IA, the bank holds loans and leases worth $100.5 million, including real estate loans of $68.0 million. U.S. bank customers currently have $106.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Iowa State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial strength. It acts as a cushion against losses and provides protection for depositors when a bank is experiencing financial trouble. When looking at safety and soundness, the higher the capital, the better.

Iowa State Bank beat out the national average of 13.13 points on our test to measure capital adequacy, racking up 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Iowa State Bank's Tier 1 capital ratio was 14.41 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, Iowa State Bank held equity amounting to 12.17 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 problem assets, such as unpaid mortgages.

A bank with a large number of these types of assets may eventually be required to use capital to absorb losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.03 percent of Iowa 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 deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Iowa State Bank's loan loss allowance was 5,954.84 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

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, likely making the bank better able to withstand financial trouble. Conversely, losses diminish a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Iowa State Bank's most recent annualized quarterly return on equity was 14.99 percent, above the national average of 8.10 percent.

The bank reported net income of $2.2 million on total equity of $15.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.79 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.