Safe and Sound

Keystone Savings Bank

Marengo, IA
4
Star Rating
Started in 1935, Keystone Savings Bank is an FDIC-insured bank based in Marengo, IA. The bank has equity of $10.8 million on assets of $102.3 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 27 full-time employees in 4 offices in IA, the bank currently holds loans and leases worth $56.9 million, including $45.6 million worth of real estate loans. The bank currently holds $87.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Keystone Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a crucial measurement of a bank's financial resilience. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Keystone Savings Bank received a score of 12 out of a possible 30 points, falling short of the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Keystone Savings Bank's Tier 1 capital ratio was 14.81 percent, higher than the 6 percent level considered adequate by regulators, 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 economic headwinds.

Overall, Keystone Savings Bank held equity amounting to 10.58 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these kinds of assets may eventually be required to use capital to cover 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, reducing earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, Keystone Savings Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.10 percent of Keystone Savings 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a handy 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 Keystone Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, Keystone Savings Bank scored 16 out of a possible 30, 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. Keystone Savings Bank's most recent annualized quarterly return on equity was 7.45 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $791,000 on total equity of $10.8 million. The bank reported an annualized return on average assets, or ROA, of 0.74 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.