Safe and Sound

Prescott State Bank

Prescott, KS
4
Star Rating
Prescott State Bank is an FDIC-insured bank started in 1904 and currently based in Prescott, KS. Regulatory filings show the bank having equity of $2.0 million on assets of $13.4 million, as of December 31, 2017.

Thanks to the work of 4 full-time employees, the bank holds loans and leases worth $6.9 million, including $4.3 million worth of real estate loans. The bank currently holds $10.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Prescott State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders during periods of financial trouble for the bank. Therefore, when it comes to measuring an a bank's financial fortitude, capital is key. When it comes to safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Prescott State Bank scored 20 out of a possible 30 points, better than the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Prescott State Bank's Tier 1 capital ratio was 27.24 percent, higher than the 6 percent level considered adequate by regulators, and above 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, Prescott State Bank held equity amounting to 14.66 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

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

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

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, none of Prescott State 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used 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 Prescott State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Prescott State Bank did below-average on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Prescott State Bank's most recent annualized quarterly return on equity was 3.00 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $58,000 on total equity of $2.0 million. The bank experienced an annualized return on average assets, or ROA, of 0.43 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.