Safe and Sound

Peoples Community Bank

Montross, VA
4
Star Rating
Peoples Community Bank is an FDIC-insured bank started in 1913 and currently headquartered in Montross, VA. The bank holds equity of $15.8 million on assets of $184.2 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $166.5 million on deposit at 5 offices in VA run by 49 full-time employees. With that footprint, the bank has amassed loans and leases worth $142.5 million, including $122.9 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Community Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to grade U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors during times of financial trouble for the bank. It follows then that when it comes to measuring an an institution's financial fortitude, capital is crucial. From a safety and soundness perspective, the higher the capital, the better.

Peoples Community Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Peoples Community Bank's Tier 1 capital ratio was 12.33 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Peoples Community Bank held equity amounting to 8.56 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

Having lots of these types of assets may eventually force a bank to use capital to absorb losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and elevating the chances of a future failure.

On Bankrate's asset quality test, Peoples Community Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.11 percent of Peoples Community Bank'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 problem assets . Comparing the size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Peoples Community Bank's loan loss allowance was 1,410.32 percent of its total noncurrent loans, above the national average. All things 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 safety and soundness. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

Peoples Community Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. Peoples Community Bank's most recent annualized quarterly return on equity was 5.46 percent, below the national average of 8.10 percent.

The bank recorded net income of $848,000 on total equity of $15.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.47 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.