Safe and Sound

Peoples Bank & Trust Company

Manchester, TN
4
Star Rating
Manchester, TN-based Peoples Bank & Trust Company is an FDIC-insured bank started in 1905. As of December 31, 2017, the bank held equity of $10.5 million on assets of $97.6 million.

Thanks to the efforts of 25 full-time employees, the bank holds loans and leases worth $61.7 million, $47.7 million of which are for real estate. U.S. bank customers currently have $85.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Bank & Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors when a bank is experiencing financial instability. It follows then that when it comes to measuring an an institution's financial resilience, capital is valuable. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, Peoples Bank & Trust Company received a score of 12 out of a possible 30 points, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Peoples Bank & Trust Company's Tier 1 capital ratio was 15.17 percent, exceeding 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 weather economic difficulties.

Overall, Peoples Bank & Trust Company held equity amounting to 10.78 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

Having lots of these kinds of assets means a bank could have to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and elevating the risk of a failure in the future.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.06 percent of Peoples Bank & Trust Company's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Peoples Bank & Trust Company's loan loss allowance was 2,491.43 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, potentially making the bank better able to withstand economic trouble. Conversely, losses diminish a bank's ability to do those things.

Peoples Bank & Trust Company scored 10 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Peoples Bank & Trust Company was 4.73 percent, below the national average of 8.10 percent.

The bank earned net income of $491,000 on total equity of $10.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.51 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.