Safe and Sound

Black Hills Community Bank, N.A.

Rapid City, SD
5
Star Rating
Black Hills Community Bank, N.A. is a Rapid City, SD-based, FDIC-insured bank started in 2007. Regulatory filings show the bank having equity of $26.2 million on $242.7 million in assets, as of December 31, 2017.

U.S. bank customers have $215.7 million on deposit at 2 offices in SD run by 47 full-time employees. With that footprint, the bank currently holds loans and leases worth $206.7 million, $179.3 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Black Hills Community Bank, N.A. exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial fortitude. It acts as a bulwark against losses and as protection for depositors during periods of economic instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

Black Hills Community Bank, N.A. fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 12 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Black Hills Community Bank, N.A.'s Tier 1 capital ratio was 11.60 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, Black Hills Community Bank, N.A. held equity amounting to 10.79 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these types of assets could eventually have to use capital to absorb losses, decreasing its buffer 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 risk of a failure in the future.

Black Hills Community Bank, N.A. scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.18 percent of Black Hills Community Bank, N.A.'s loans were noncurrent -- in other words, 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 . Comparing the reserve's size to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Black Hills Community Bank, N.A.'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, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, Black Hills Community Bank, N.A. scored 20 out of a possible 30, exceeding the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for Black Hills Community Bank, N.A. was 11.06 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.8 million on total equity of $26.2 million. The bank had an annualized return on average assets, or ROA, of 1.21 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.