Safe and Sound

State Bank

New Hampton, IA
4
Star Rating
State Bank is an FDIC-insured bank started in 1937 and currently headquartered in New Hampton, IA. The bank holds equity of $37.9 million on $376.7 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 76 full-time employees in 9 offices in IA, the bank holds loans and leases worth $220.3 million, $140.7 million of which are for real estate. U.S. bank customers currently have $304.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors during periods of economic trouble for the bank. It follows then that a bank's level of capital is a crucial measurement of a bank's financial fortitude. From a safety and soundness perspective, more capital is better.

State Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. State Bank's Tier 1 capital ratio was 10.88 percent, higher than 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 weather economic difficulties.

Overall, State Bank held equity amounting to 10.06 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 unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and increasing the chances of a future failure.

On Bankrate's asset quality test, State Bank scored 40 out of a possible 40 points, exceeding 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, 0.28 percent of 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand economic shocks. Losses, on the other hand, reduce a bank's ability to do those things.

State Bank beat the national average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. State Bank's most recent annualized quarterly return on equity was 10.18 percent, above the national average of 8.10 percent.

The bank recorded net income of $4.2 million on total equity of $37.9 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.12 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.