Safe and Sound

Peoples State Bank of Colfax

Colfax, IL
5
Star Rating
Founded in 1892, Peoples State Bank of Colfax is an FDIC-insured bank based in Colfax, IL. Regulatory filings show the bank having equity of $3.9 million on assets of $36.0 million, as of December 31, 2017.

With 7 full-time employees, the bank holds loans and leases worth $20.9 million, including real estate loans of $9.4 million. U.S. bank customers currently have $31.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Peoples State Bank of Colfax exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a key measurement of an institution's financial strength. When it comes to safety and soundness, the higher the capital, the better.

Peoples State Bank of Colfax received a score of 12 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Peoples State Bank of Colfax's Tier 1 capital ratio was 18.39 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, Peoples State Bank of Colfax held equity amounting to 10.90 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets may eventually have to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

Peoples State Bank of Colfax did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, none of Peoples State Bank of Colfax'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 . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Peoples State Bank of Colfax's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand economic shocks. Banks that are losing money, however, are less able to do those things.

Peoples State Bank of Colfax outperformed the average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Peoples State Bank of Colfax's most recent annualized quarterly return on equity was 9.56 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $377,000 on total equity of $3.9 million. The bank had an annualized return on average assets, or ROA, of 1.08 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.