Safe and Sound

New Peoples Bank, Inc.

Honaker, VA
3
Star Rating
Honaker, VA-based New Peoples Bank, Inc. is an FDIC-insured bank started in 1998. The bank holds equity of $65.1 million on assets of $665.8 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $584.2 million on deposit at 23 offices in multiple states run by 255 full-time employees. With that footprint, the bank has amassed loans and leases worth $506.8 million, including real estate loans of $445.1 million.

Overall, Bankrate believes that, as of December 31, 2017, New Peoples Bank, Inc. exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is key. It works as a buffer against losses and affords protection for accountholders during times of economic instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

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

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. New Peoples Bank, Inc.'s Tier 1 capital ratio was 14.05 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, New Peoples Bank, Inc. held equity amounting to 9.77 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these types of assets suggests a bank may have to use capital to absorb 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 money, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, New Peoples Bank, Inc. scored 32 out of a possible 40 points, below the national average of 37.49 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, 1.47 percent of New Peoples Bank, Inc.'s loans were noncurrent -- in other words, 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on New Peoples Bank, Inc.'s loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

New Peoples Bank, Inc. fell behind the national average on Bankrate's test of earnings, achieving a score of 10 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for New Peoples Bank, Inc. was 4.74 percent, below the national average of 8.10 percent.

The bank recorded net income of $3.0 million on total equity of $65.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.47 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.