Safe and Sound

The Solomon State Bank

Solomon, KS
5
Star Rating
Founded in 1905, The Solomon State Bank is an FDIC-insured bank headquartered in Solomon, KS. As of December 31, 2017, the bank held equity of $29.0 million on $199.4 million in assets.

Thanks to the efforts of 20 full-time employees in 3 offices in KS, the bank holds loans and leases worth $164.8 million, $146.2 million of which are for real estate. U.S. bank customers currently have $160.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Solomon State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major 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 affords protection for depositors when a bank is experiencing economic trouble. Therefore, when it comes to measuring an an institution's financial stability, capital is important. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, The Solomon State Bank racked up 20 out of a possible 30 points, exceeding the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. The Solomon State Bank's Tier 1 capital ratio was 22.96 percent, above 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 downturns.

Overall, The Solomon State Bank held equity amounting to 14.53 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these types of assets may eventually have to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

The Solomon State Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, better than 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, 0.07 percent of The Solomon 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 problem assets . Comparing the reserve's size to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. The Solomon State Bank's loan loss allowance was 4,689.17 percent of its total noncurrent loans, exceeding the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

The Solomon State Bank scored 22 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for The Solomon State Bank was 12.92 percent, above the national average of 8.10 percent.

The bank recorded net income of $3.6 million on total equity of $29.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.84 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.