Safe and Sound

Richland State Bank

Bruce, SD
5
Star Rating
Bruce, SD-based Richland State Bank is an FDIC-insured bank started in 1927. Regulatory filings show the bank having equity of $9.3 million on $43.5 million in assets, as of December 31, 2017.

With 10 full-time employees, the bank currently holds loans and leases worth $14.5 million, including real estate loans of $5.2 million. U.S. bank customers currently have $34.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Richland State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is important. It acts as a bulwark against losses and affords protection for depositors during times of economic instability for the bank. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, Richland State Bank racked up 30 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. Richland State Bank's Tier 1 capital ratio was 44.11 percent, above the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Richland State Bank held equity amounting to 21.48 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets suggests a bank may have to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a failure in the future.

On Bankrate's asset quality test, Richland State Bank scored 40 out of a possible 40 points, beating 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 Richland 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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Richland State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses take away from a bank's ability to do those things.

Richland State Bank scored 18 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Richland State Bank was 6.99 percent, below the national average of 8.10 percent.

The bank earned net income of $748,000 on total equity of $9.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.69 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.