Safe and Sound

Peoples State Bank

Shepherd, TX
4
Star Rating
Started in 1921, Peoples State Bank is an FDIC-insured bank based in Shepherd, TX. Regulatory filings show the bank having equity of $9.9 million on $107.7 million in assets, as of December 31, 2017.

Thanks to the work of 30 full-time employees in 3 offices in TX, the bank holds loans and leases worth $37.7 million, including real estate loans of $31.5 million. The bank currently holds $97.6 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Peoples State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is useful. It works as a bulwark against losses and affords protection for depositors when a bank is experiencing financial trouble. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Peoples State Bank received a score of 10 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Peoples State Bank's Tier 1 capital ratio was 21.74 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Peoples State Bank held equity amounting to 9.16 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these types of assets may eventually require a bank to use capital to cover 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 depressed earnings and potentially more risk of a future failure.

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

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, none of Peoples State 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 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic 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 State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand financial trouble. Losses, on the other hand, take away from a bank's ability to do those things.

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

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. Peoples State Bank's most recent annualized quarterly return on equity was 8.90 percent, above the national average of 8.10 percent.

The bank recorded net income of $881,000 on total equity of $9.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.81 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.