Safe and Sound

PEOPLES BANK

Sheridan, AR
5
Star Rating
Founded in 2000, PEOPLES BANK is an FDIC-insured bank based in Sheridan, AR. As of December 31, 2017, the bank held equity of $20.2 million on $154.3 million in assets.

U.S. bank customers have $133.8 million on deposit at 2 offices in AR run by 25 full-time employees. With that footprint, the bank holds loans and leases worth $72.5 million, including real estate loans of $49.1 million.

Overall, Bankrate believes that, as of December 31, 2017, PEOPLES BANK exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is essential. It acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

PEOPLES BANK did better than the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 18 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 23.06 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, PEOPLES BANK held equity amounting to 13.11 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

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

PEOPLES BANK exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.05 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 below 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." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. PEOPLES BANK's loan loss allowance was 2,945.95 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

PEOPLES BANK exceeded the national average on Bankrate's test of earnings, achieving a score of 20 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. The most recent annualized quarterly return on equity for PEOPLES BANK was 10.53 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.1 million on total equity of $20.2 million. The bank had an annualized return on average assets, or ROA, of 1.39 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.