Safe and Sound

Plains Commerce Bank

Hoven, SD
4
Star Rating
Plains Commerce Bank is an FDIC-insured bank founded in 1931 and currently headquartered in Hoven, SD. As of December 31, 2017, the bank held equity of $87.5 million on $650.3 million in assets.

U.S. bank customers have $558.6 million on deposit at 9 offices in multiple states run by 203 full-time employees. With that footprint, the bank holds loans and leases worth $513.0 million, $399.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Plains Commerce Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to grade American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is key. It works as a bulwark against losses and provides protection for accountholders during times of economic instability for the bank. From a safety and soundness perspective, the higher the capital, the better.

Plains Commerce Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, scoring 16 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Plains Commerce Bank's Tier 1 capital ratio was 13.83 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 suggests the bank will be better able to stand up to economic downturns.

Overall, Plains Commerce Bank held equity amounting to 13.45 percent of its assets, which exceeded 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 mortgages.

A bank with extensive holdings of these types of assets could eventually be forced to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the chances of a future failure.

On Bankrate's asset quality test, Plains Commerce Bank scored 24 out of a possible 40 points, lower than the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 5.19 percent of Plains Commerce Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy 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 Plains Commerce Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand financial trouble. Banks that are losing money, however, are less able to do those things.

Plains Commerce Bank scored 22 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Plains Commerce Bank's most recent annualized quarterly return on equity was 12.53 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $10.7 million on total equity of $87.5 million. The bank reported an annualized return on average assets, or ROA, of 1.68 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.