Safe and Sound

Iowa State Bank

Des Moines, IA
5
Star Rating
Iowa State Bank is an FDIC-insured bank started in 1941 and currently headquartered in Des Moines, IA. Regulatory filings show the bank having equity of $62.4 million on $377.5 million in assets, as of December 31, 2017.

With 73 full-time employees in 5 offices in IA, the bank has amassed loans and leases worth $164.9 million, including real estate loans of $147.7 million. U.S. bank customers currently have $306.4 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. Here's a look at how the bank did on the three major criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a crucial measurement of an institution's financial strength. From a safety and soundness perspective, more capital is better.

Iowa State Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 24 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Iowa State Bank's Tier 1 capital ratio was 26.42 percent, exceeding the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Iowa State Bank held equity amounting to 16.53 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these kinds of assets could eventually be forced to use capital to absorb losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

Iowa State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.01 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 handle problem assets known as an "allowance for loan and lease losses." The size of that reserve 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. Iowa State Bank's loan loss allowance was 23,660.00 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, Iowa State Bank scored 20 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Iowa State Bank was 10.99 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $6.7 million on total equity of $62.4 million. The bank experienced an annualized return on average assets, or ROA, of 1.80 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.