Safe and Sound

Peoples Savings Bank

Montezuma, IA
5
Star Rating
Montezuma, IA-based Peoples Savings Bank is an FDIC-insured bank founded in 1946. Regulatory filings show the bank having equity of $4.2 million on $36.4 million in assets, as of December 31, 2017.

Thanks to the efforts of 8 full-time employees, the bank has amassed loans and leases worth $15.7 million, including $7.3 million worth of real estate loans. U.S. bank customers currently have $32.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Savings Bank 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 score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors during times of economic trouble for the bank. Therefore, a bank's level of capital is a crucial measurement of a bank's financial fortitude. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Peoples Savings Bank scored 14 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Peoples Savings Bank's Tier 1 capital ratio was 19.14 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, Peoples Savings Bank held equity amounting to 11.66 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets could eventually be required to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Peoples Savings Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.57 percent of Peoples Savings 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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Peoples Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

Peoples Savings Bank scored 16 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Peoples Savings Bank was 7.52 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $316,000 on total equity of $4.2 million. The bank had an annualized return on average assets, or ROA, of 0.87 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.