Safe and Sound

Andes State Bank

Lake Andes, SD
5
Star Rating
Lake Andes, SD-based Andes State Bank is an FDIC-insured bank started in 1962. Regulatory filings show the bank having equity of $2.6 million on $26,079,000 in assets, as of June 30, 2017.

Thanks to the work of 6 full-time employees, the bank holds loans and leases worth $11.7 million, $5.7 million of which are for real estate. The bank currently holds $23.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Andes 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 important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for accountholders during times of financial instability for the bank. It follows then that a bank's level of capital is an important measurement of an institution's financial strength. From a safety and soundness perspective, more capital is better.
Andes State Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.38.

One important measure of this buffer is a bank's Tier 1 capital ratio. Andes State Bank's Tier 1 capital ratio was 18.01 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Andes State Bank held equity amounting to 10.08 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these types of assets may eventually force a bank to use capital to cover losses, cutting down on 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, pushing down earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Andes State Bank scored 40 out of a possible 40 points, better than the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 1.39 percent of Andes State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Andes State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

Andes State Bank beat the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Andes State Bank's most recent annualized quarterly return on equity was 8.21 percent, below the national average of 9.28 percent.

The bank earned net income of $106,000 on total equity of $2.6 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 0.80 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.