Safe and Sound

Palmetto State Bank

Hampton, SC
5
Star Rating
Hampton, SC-based Palmetto State Bank is an FDIC-insured bank founded in 1907. As of December 31, 2017, the bank held equity of $86.1 million on assets of $553.2 million.

Thanks to the efforts of 83 full-time employees in 8 offices in SC, the bank has amassed loans and leases worth $173.0 million, including $132.8 million worth of real estate loans. U.S. bank customers currently have $458.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Palmetto State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is essential. It works as a cushion against losses and as protection for accountholders when a bank is experiencing economic instability. When it comes to safety and soundness, the more capital, the better.

Palmetto State Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 22 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Palmetto State Bank's Tier 1 capital ratio was 32.39 percent, above the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, Palmetto State Bank held equity amounting to 15.56 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due mortgages.

A bank with lots of these kinds of assets may eventually have to use capital to absorb losses, cutting down on its equity buffer. 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 reduced earnings and potentially more risk of a failure in the future.

Palmetto State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.65 percent of Palmetto State Bank'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Palmetto State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's test of earnings, Palmetto State Bank scored 18 out of a possible 30, beating the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Palmetto State Bank was 9.06 percent, above the national average of 8.10 percent.

The bank earned net income of $7.5 million on total equity of $86.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.36 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.