Safe and Sound

State Bank of Lakota

Lakota, ND
5
Star Rating
State Bank of Lakota is an FDIC-insured bank started in 1900 and currently headquartered in Lakota, ND. As of December 31, 2017, the bank held equity of $4.7 million on assets of $57.6 million.

Thanks to the work of 10 full-time employees, the bank has amassed loans and leases worth $32.8 million, $12.8 million of which are for real estate. The bank currently holds $52.9 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, State Bank of Lakota exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to grade 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 cushion against losses and provides protection for depositors during times of financial trouble for the bank. Therefore, a bank's level of capital is an important measurement of a bank's financial strength. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, State Bank of Lakota received a score of 8 out of a possible 30 points, below the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. State Bank of Lakota's Tier 1 capital ratio was 13.92 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, State Bank of Lakota held equity amounting to 8.20 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these kinds of assets could eventually force a bank to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and elevating the risk of a future failure.

State Bank of Lakota did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.09 percent of State Bank of Lakota's loans were noncurrent -- in other words, 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 deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on State Bank of Lakota'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, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

State Bank of Lakota exceeded the national average on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. State Bank of Lakota's most recent annualized quarterly return on equity was 12.45 percent, above the national average of 8.10 percent.

The bank earned net income of $596,000 on total equity of $4.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.21 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.