Safe and Sound

Peoples Bank

Clifton, TN
2
Star Rating
Started in 1890, Peoples Bank is an FDIC-insured bank headquartered in Clifton, TN. As of December 31, 2017, the bank had equity of $16.0 million on assets of $185.1 million.

Thanks to the efforts of 49 full-time employees in 3 offices in TN, the bank currently holds loans and leases worth $141.8 million, $79.0 million of which are for real estate. U.S. bank customers currently have $165.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Bank exhibited a below-average condition, earning 2 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 grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is useful. It works as a bulwark against losses and affords protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is better.

Peoples Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Peoples Bank's Tier 1 capital ratio was 10.65 percent, exceeding the 6 percent level considered adequate by regulators, but less than 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 held equity amounting to 8.65 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these types of assets may eventually be forced to use capital to cover losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the risk of a failure in the future.

Peoples Bank scored 20 out of a possible 40 points on Bankrate's asset quality test, failing to reach the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.25 percent of Peoples Bank'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 1.01 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 widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Peoples Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

Peoples Bank underperformed the average on Bankrate's earnings test, achieving a score of 14 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Peoples Bank's most recent annualized quarterly return on equity was 7.18 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.1 million on total equity of $16.0 million. The bank reported an annualized return on average assets, or ROA, of 0.64 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.