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Banks very solid in South Dakota but conditions soon could weaken

SIOUX FALLS -- Nearly all of the 52 state-chartered banks in South Dakota are in the top two tiers of ratings for financial strength, the state Banking Commission learned Thursday...

SIOUX FALLS - Nearly all of the 52 state-chartered banks in South Dakota are in the top two tiers of ratings for financial strength, the state Banking Commission learned Thursday

That is a major improvement from their post-recession conditions six years ago.

There were 19 that rated in the bottom three tiers then.

Currently there aren't any in the lowest tier or the next weakest tier. Three are in the middle of the five-tier rating system.

There are 29 in the second-strongest level and 20 at the top. There also are eight fewer state-chartered banks now than at the end of 2010.

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"This is as good as it gets," Bret Afdahls told the commissioners. He is director for the state Division of Banking.

The division examines the state-chartered banks throughout South Dakota and therefore has a solid feel for their financial health.

Afdahl said a string of strong years in the agriculture economy helped solidify banks' conditions. He said farmers and ranchers now face more difficult times and banks' books soon will reflect it.

"These numbers are going to change over the next 12 to 18 months," he told commissioners.

Curt Everson, president for the South Dakota Bankers Association, gave a short presentation about how more federal regulations since the recession have crimped returns on earnings for all sizes of banks nationally.

Depending on the bank's size, the return has fallen approximately 20 to 30 percent, when the periods of 2002-2007 and 2011-2016 are compared, he said.

He said federal bank charters shrunk because of failures and mergers since 2000. He said only six new federal banks have been chartered since 2010.

"That's the canary in the coal mine," Everson said.

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