Safe and Sound

Peoples State Bank of Wells

Wells, MN
5
Star Rating
Started in 1924, Peoples State Bank of Wells is an FDIC-insured bank based in Wells, MN. Regulatory filings show the bank having equity of $6.9 million on $57.6 million in assets, as of December 31, 2017.

With 13 full-time employees, the bank holds loans and leases worth $44.9 million, including real estate loans of $28.7 million. U.S. bank customers currently have $50.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Peoples State Bank of Wells exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key 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

Capital works as a bulwark against losses and as protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial resilience, capital is valuable. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Peoples State Bank of Wells received a score of 12 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Peoples State Bank of Wells's Tier 1 capital ratio was 13.84 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, Peoples State Bank of Wells held equity amounting to 11.94 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 problem assets, such as past-due mortgages.

A bank with large numbers of these kinds of assets could eventually be required to use capital to cover losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the chances of a failure in the future.

On Bankrate's asset quality test, Peoples State Bank of Wells scored 40 out of a possible 40 points, above 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, 0.20 percent of Peoples State Bank of Wells'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Peoples State Bank of Wells's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic shocks. However, banks that are losing money are less able to do those things.

Peoples State Bank of Wells received above-average marks on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. Peoples State Bank of Wells's most recent annualized quarterly return on equity was 12.25 percent, above the national average of 8.10 percent.

The bank reported net income of $831,000 on total equity of $6.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.48 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.