Safe and Sound

Peoples Bank and Trust Company of Madison County

Berea, KY
4
Star Rating
Peoples Bank and Trust Company of Madison County is a Berea, KY-based, FDIC-insured bank that opened its doors in 1970. Regulatory filings show the bank having equity of $53.2 million on $396.3 million in assets, as of December 31, 2017.

Thanks to the efforts of 78 full-time employees in 10 offices in KY, the bank has amassed loans and leases worth $225.9 million, $207.3 million of which are for real estate. U.S. bank customers currently have $306.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Bank and Trust Company of Madison County 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 major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for account holders during times of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial strength, capital is important. When it comes to safety and soundness, the higher the capital, the better.

Peoples Bank and Trust Company of Madison County racked up 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Peoples Bank and Trust Company of Madison County's Tier 1 capital ratio was 19.94 percent, exceeding 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 economic headwinds.

Overall, Peoples Bank and Trust Company of Madison County held equity amounting to 13.43 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 problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets suggests a bank could have to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a future failure.

Peoples Bank and Trust Company of Madison County scored 36 out of a possible 40 points on Bankrate's asset quality test, below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.18 percent of Peoples Bank and Trust Company of Madison County'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Peoples Bank and Trust Company of Madison County's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank better prepared to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

Peoples Bank and Trust Company of Madison County fell behind the national average on Bankrate's test of earnings, achieving a score of 10 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for Peoples Bank and Trust Company of Madison County was 4.22 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.3 million on total equity of $53.2 million. The bank experienced an annualized return on average assets, or ROA, of 0.57 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.