Safe and Sound

South Story Bank & Trust

Slater, IA
4
Star Rating
Founded in 1954, South Story Bank & Trust is an FDIC-insured bank headquartered in Slater, IA. Regulatory filings show the bank having equity of $17.5 million on $188.9 million in assets, as of December 31, 2017.

U.S. bank customers have $166.5 million on deposit at 3 offices in IA run by 32 full-time employees. With that footprint, the bank currently holds loans and leases worth $145.9 million, including real estate loans of $106.8 million.

Overall, Bankrate believes that, as of December 31, 2017, South Story Bank & Trust exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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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. Therefore, a bank's level of capital is a key measurement of a bank's financial strength. When it comes to safety and soundness, more capital is better.

South Story Bank & Trust received a score of 6 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. South Story Bank & Trust's Tier 1 capital ratio was 9.94 percent, exceeding the 6 percent level regulators consider adequate, but lower 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 headwinds.

Overall, South Story Bank & Trust held equity amounting to 9.24 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having large numbers of these types of assets could eventually force 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, decreasing earnings and increasing the chances of a future failure.

On Bankrate's asset quality test, South Story Bank & Trust scored 36 out of a possible 40 points, lower than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.03 percent of South Story Bank & Trust's loans were noncurrent -- in other words, 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on South Story Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially 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 earnings test, South Story Bank & Trust scored 22 out of a possible 30, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for South Story Bank & Trust was 14.30 percent, above the national average of 8.10 percent.

The bank reported net income of $2.4 million on total equity of $17.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.38 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.