Safe and Sound

Dacotah Bank

Aberdeen, SD
4
Star Rating
Dacotah Bank is an FDIC-insured bank founded in 1955 and currently based in Aberdeen, SD. As of December 31, 2017, the bank held equity of $263.5 million on assets of $2.40 billion.

U.S. bank customers have $2.08 billion on deposit at 32 offices in multiple states run by 493 full-time employees. With that footprint, the bank has amassed loans and leases worth $1.95 billion, $1.27 billion of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Dacotah Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial strength. It works as a bulwark against losses and provides protection for accountholders during periods of financial trouble for the bank. From a safety and soundness perspective, the higher the capital, the better.

Dacotah Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Dacotah Bank's Tier 1 capital ratio was 12.13 percent, higher than 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 downturns.

Overall, Dacotah Bank held equity amounting to 10.99 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

A bank with lots of these kinds of assets may eventually be required to use capital to cover losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

Dacotah Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.89 percent of Dacotah 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Dacotah Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand financial trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Dacotah Bank scored 14 out of a possible 30, lower than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Dacotah Bank's most recent annualized quarterly return on equity was 6.70 percent, below the national average of 8.10 percent.

The bank recorded net income of $17.3 million on total equity of $263.5 million for the twelve months ended December 31, 2017. 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.