Safe and Sound

Iowa State Bank

Hull, IA
5
Star Rating
Founded in 1879, Iowa State Bank is an FDIC-insured bank based in Hull, IA. Regulatory filings show the bank having equity of $78.3 million on assets of $604.3 million, as of December 31, 2017.

With 88 full-time employees in 9 offices in IA, the bank holds loans and leases worth $427.9 million, including real estate loans of $314.1 million. U.S. bank customers currently have $448.6 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 fared on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is key. It acts as a cushion against losses and as protection for accountholders during periods of economic trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Iowa State Bank scored 16 out of a possible 30 points, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Iowa State Bank's Tier 1 capital ratio was 13.94 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Iowa State Bank held equity amounting to 12.96 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these types of assets could eventually require a bank to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and elevating the risk of a failure in the future.

Iowa State Bank scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 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, 0.05 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 widely used 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 2,429.22 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

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand economic shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Iowa State Bank scored 18 out of a possible 30, beating the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Iowa State Bank's most recent annualized quarterly return on equity was 9.12 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $6.9 million on total equity of $78.3 million. The bank had an annualized return on average assets, or ROA, of 1.19 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.