Safe and Sound

The Peoples State Bank of Newton, Illinois

Newton, IL
5
Star Rating
The Peoples State Bank of Newton, Illinois is an FDIC-insured bank founded in 1875 and currently based in Newton, IL. The bank holds equity of $43.3 million on assets of $391.8 million, according to December 31, 2017, regulatory filings.

With 74 full-time employees in 6 offices in IL, the bank has amassed loans and leases worth $291.4 million, including real estate loans of $179.6 million. U.S. bank customers currently have $315.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Peoples State Bank of Newton, Illinois exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors when a bank is experiencing economic instability. Therefore, a bank's level of capital is a crucial measurement of a bank's financial resilience. From a safety and soundness perspective, more capital is better.

On our test to measure capital adequacy, The Peoples State Bank of Newton, Illinois received a score of 12 out of a possible 30 points, coming in below the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. The Peoples State Bank of Newton, Illinois's Tier 1 capital ratio was 13.09 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, The Peoples State Bank of Newton, Illinois held equity amounting to 11.04 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 effect of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these kinds of assets could eventually force 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 no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, The Peoples State Bank of Newton, Illinois scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.37 percent of The Peoples State Bank of Newton, Illinois'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 troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The Peoples State Bank of Newton, Illinois'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 cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The Peoples State Bank of Newton, Illinois's most recent annualized quarterly return on equity was 9.75 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $4.1 million on total equity of $43.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.06 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.