Safe and Sound

Peoples Bank of East Tennessee

Madisonville, TN
4
Star Rating
Founded in 1997, Peoples Bank of East Tennessee is an FDIC-insured bank headquartered in Madisonville, TN. As of December 31, 2017, the bank had equity of $24.4 million on assets of $206.5 million.

U.S. bank customers have $180.8 million on deposit at 10 offices in multiple states run by 81 full-time employees. With that footprint, the bank has amassed loans and leases worth $147.0 million, $129.9 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Bank of East Tennessee exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It works as a buffer against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

Peoples Bank of East Tennessee scored above the national average of 13.13 points on our test to measure capital adequacy, racking up 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Peoples Bank of East Tennessee's Tier 1 capital ratio was 17.08 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Peoples Bank of East Tennessee held equity amounting to 11.80 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these types of assets may eventually be forced to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and elevating the chances of a failure in the future.

Peoples Bank of East Tennessee scored 28 out of a possible 40 points on Bankrate's asset quality test, lower than the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.55 percent of Peoples Bank of East Tennessee'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 to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Peoples Bank of East Tennessee's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Peoples Bank of East Tennessee scored 14 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Peoples Bank of East Tennessee was 7.08 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.7 million on total equity of $24.4 million. The bank reported an annualized return on average assets, or ROA, of 0.83 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.