Safe and Sound

Peoples Bank

Lubbock, TX
5
Star Rating
Peoples Bank is a Lubbock, TX-based, FDIC-insured bank founded in 1968. The bank holds equity of $49.4 million on $474.3 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $423.5 million on deposit at 8 offices in TX run by 106 full-time employees. With that footprint, the bank holds loans and leases worth $357.8 million, $202.8 million of which are for real estate.

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 major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is a useful measurement of a bank's financial fortitude. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Peoples Bank received a score of 12 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Peoples Bank's Tier 1 capital ratio was 12.75 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, Peoples Bank held equity amounting to 10.42 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets means a bank may eventually have to use capital to absorb losses, diminishing 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, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Peoples Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 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, 0.01 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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Peoples Bank's loan loss allowance was 11,966.67 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 affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

Peoples Bank exceeded 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, basically) 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 was 11.35 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $5.3 million on total equity of $49.4 million. The bank had an annualized return on average assets, or ROA, of 1.17 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.