2023 Community Bank Case Study Competition Journal

2023 COMMUNITY BANK CASE STUDY COMPETITION

2 ND PLACE Iowa State University

Make Your Luck by Sundown: An Analysis of Peoples Savings Bank

Students: Matthew Ayres Molly Berte Reese Manternach Brett McGee Adeline Meyer Faculty Advisors: Curt Hoff Dr. Peter Orazem

Part I: Financials The financials of PSB for the five-year period ending 2022 were analyzed using the Federal Financial Institutions Examination Council (FFIEC) Uniform Performance Bank Report (UBPR). PSB utilizes a customized peer group of six other like-sized community banks in Iowa with similar characteristics to itself. 1 The team compares the PSB metrics to those of the custom bank group and to the state of Iowa averages for this period. Earnings and Profitability Banking is a margin business, and PSB’s net interest margin (NIM) is at or slightly below peer, as illustrated in Table 1. A lower-than-desired loan-to-deposit ratio (LTD) over the last five years is a function of loan growth projections trailing that of deposit growth. PSB’s LTD ratio normalizes to about 5% lower than the custom peer group and 10% or more below the average for all banks in Iowa. A low LTD ratio compresses earnings, and PSB’s return on assets (ROA) falls slightly below peer. Growing a developing franchise has a cost reflected in lower earnings when a larger portion of its funds is invested in lower-yielding bonds than higher-earning loans. Halterman states, “Moving into new markets comes at a price with our cost of funds, but will build enterprise value in the long run.”

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