Safe and Sound

Peoples Bank of Commerce

Cambridge, MN
4
Star Rating
Peoples Bank of Commerce is a Cambridge, MN-based, FDIC-insured bank dating back to 1916. As of June 30, 2017, the bank held equity of $34.6 million on assets of $292.1 million.

U.S. bank customers have $253.8 million on deposit at 5 offices in MN run by 53 full-time employees. With that footprint, the bank currently holds loans and leases worth $164.6 million, $116.9 million of which are for real estate.

Overall, Bankrate believes that, as of June 30, 2017, Peoples Bank of Commerce exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank faired on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

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 fortitude, capital is useful. It acts as a bulwark against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is better.
Peoples Bank of Commerce achieved a score of 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.38.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Peoples Bank of Commerce's Tier 1 capital ratio was 16.68 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, Peoples Bank of Commerce held equity amounting to 11.83 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

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

A bank with a large number of these types of assets may eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Peoples Bank of Commerce scored 36 out of a possible 40 points, below the national average of 37.62 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 1.76 percent of Peoples Bank of Commerce'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 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the that reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Peoples Bank of Commerce'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, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Peoples Bank of Commerce beat the national average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. Peoples Bank of Commerce's most recent annualized quarterly return on equity was 11.18 percent, above the national average of 9.28 percent.

The bank earned net income of $1.9 million on total equity of $34.6 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 1.27 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.