Safe and Sound

First State Bank of Warner, S. Dak.

Warner, SD
3
Star Rating
First State Bank of Warner, S. Dak. is a Warner, SD-based, FDIC-insured bank started in 1906. As of December 31, 2017, the bank had equity of $11.0 million on $78.3 million in assets.

U.S. bank customers have $64.5 million on deposit at 2 offices in SD run by 11 full-time employees. With that footprint, the bank currently holds loans and leases worth $61.7 million, including $30.9 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Warner, S. Dak. exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for account holders during periods of financial instability for the bank. Therefore, a bank's level of capital is a useful measurement of a bank's financial resilience. From a safety and soundness perspective, the more capital, the better.

First State Bank of Warner, S. Dak. received a score of 12 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First State Bank of Warner, S. Dak.'s Tier 1 capital ratio was 12.17 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, First State Bank of Warner, S. Dak. held equity amounting to 14.01 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a future failure.

First State Bank of Warner, S. Dak. finished below the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 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, 1.84 percent of First State Bank of Warner, S. Dak.'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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on First State Bank of Warner, S. Dak.'s loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand financial trouble. Obviously, banks that are losing money have less ability to do those things.

First State Bank of Warner, S. Dak. scored 10 out of a possible 30 on Bankrate's earnings test, less than the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. First State Bank of Warner, S. Dak.'s most recent annualized quarterly return on equity was 6.06 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $527,000 on total equity of $11.0 million. The bank had an annualized return on average assets, or ROA, of 0.76 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.