Safe and Sound

Great Western Bank

Watertown, SD
4
Star Rating
Sioux Falls, SD-based Great Western Bank is an FDIC-insured bank started in 1935. The bank holds equity of $1.81 billion on assets of $11.80 billion, according to December 31, 2017, regulatory filings.

U.S. bank customers have $9.08 billion on deposit at 175 offices in multiple states run by 1,661 full-time employees. With that footprint, the bank holds loans and leases worth $9.10 billion, including $5.88 billion worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Great Western Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is crucial. It acts as a cushion against losses and as protection for depositors when a bank is experiencing economic instability. From a safety and soundness perspective, more capital is better.

On our test to measure capital adequacy, Great Western Bank received a score of 10 out of a possible 30 points, falling short of the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Great Western Bank's Tier 1 capital ratio was 11.00 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Great Western Bank held equity amounting to 15.36 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

A bank with lots of these types of assets could eventually be required to use capital to cover losses, diminishing 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, resulting in reduced earnings and potentially more risk of a failure in the future.

Great Western Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, below the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.61 percent of Great Western Bank'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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a widely used 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 Great Western Bank'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. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, likely making the bank better prepared to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

Great Western Bank scored 16 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Great Western Bank was 8.03 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $145.1 million on total equity of $1.81 billion. The bank reported an annualized return on average assets, or ROA, of 1.26 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.