Safe and Sound

Ipswich State Bank

Ipswich, SD
5
Star Rating
Founded in 1938, Ipswich State Bank is an FDIC-insured bank headquartered in Ipswich, SD. Regulatory filings show the bank having equity of $8.5 million on $52.6 million in assets, as of December 31, 2017.

Thanks to the work of 8 full-time employees, the bank currently holds loans and leases worth $30.1 million, $5.7 million of which are for real estate. The bank currently holds $43.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Ipswich State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial stability, capital is important. From a safety and soundness perspective, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Ipswich State Bank racked up 22 out of a possible 30 points, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Ipswich State Bank's Tier 1 capital ratio was 21.95 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, Ipswich State Bank held equity amounting to 16.13 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these types of assets may eventually force a bank to use capital to absorb losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Ipswich State Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Ipswich State 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Ipswich State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Ipswich State Bank received above-average marks on Bankrate's earnings test, achieving a score of 16 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Ipswich State Bank was 7.87 percent, below the national average of 8.10 percent.

The bank earned net income of $654,000 on total equity of $8.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.22 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.