Park Sterling Bank

THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial resilience. It acts as a bulwark against losses and as protection for depositors when a bank is experiencing economic instability. When looking at safety and soundness, the higher the capital, the better.
On our test to measure the adequacy of a bank's capital, Park Sterling Bank received a score of 12 out of a possible 30 points, below the national average of 13.38.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Park Sterling Bank's Tier 1 capital ratio was 12.86 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Park Sterling Bank held equity amounting to 12.57 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

Having extensive holdings of these types of assets could eventually force a bank to use capital to absorb losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Park Sterling Bank scored 40 out of a possible 40 points, better than the national average of 37.62 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.38 percent of Park Sterling 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 1.04 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Park Sterling Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

Park Sterling Bank received above-average marks on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Park Sterling Bank was 8.80 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $18.1 million on total equity of $419.2 million. The bank reported an annualized return on average assets, or ROA, of 1.10 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 percent.