Safe and Sound

Peoples Bank of Alabama

Cullman, AL
3
Star Rating
Peoples Bank of Alabama is an FDIC-insured bank founded in 1977 and currently headquartered in Cullman, AL. Regulatory filings show the bank having equity of $64.7 million on $722.9 million in assets, as of December 31, 2017.

Thanks to the work of 258 full-time employees in 25 offices in AL, the bank holds loans and leases worth $558.4 million, including real estate loans of $384.5 million. U.S. bank customers currently have $636.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Bank of Alabama 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 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 as protection for depositors when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a useful measurement of a bank's financial strength. When it comes to safety and soundness, the higher the capital, the better.

Peoples Bank of Alabama received a score of 8 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Peoples Bank of Alabama's Tier 1 capital ratio was 9.68 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Peoples Bank of Alabama held equity amounting to 8.95 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

Having extensive holdings of these kinds of assets suggests a bank may have to use capital to absorb losses, reducing its cushion of equity. 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 lower earnings and potentially more risk of a failure in the future.

Peoples Bank of Alabama scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.26 percent of Peoples Bank of Alabama'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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic 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 of Alabama'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. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Peoples Bank of Alabama scored 0 out of a possible 30 on Bankrate's earnings test, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Peoples Bank of Alabama was -0.89 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $-600,000 on total equity of $64.7 million. The bank reported an annualized return on average assets, or ROA, of -0.08 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.