Safe and Sound

Peoples Exchange Bank of Monroe County

Monroeville, AL
5
Star Rating
Monroeville, AL-based Peoples Exchange Bank of Monroe County is an FDIC-insured bank founded in 1907. As of December 31, 2017, the bank had equity of $9.4 million on assets of $61.6 million.

Thanks to the efforts of 28 full-time employees, the bank holds loans and leases worth $41.0 million, including $26.7 million worth of real estate loans. The bank currently holds $52.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Exchange Bank of Monroe County exhibited a superior condition, earning a full 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 American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders during periods of economic instability for the bank. Therefore, a bank's level of capital is a crucial measurement of an institution's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Peoples Exchange Bank of Monroe County scored 22 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Peoples Exchange Bank of Monroe County's Tier 1 capital ratio was 18.62 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, Peoples Exchange Bank of Monroe County held equity amounting to 15.22 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

Having a large number of these kinds of assets may eventually force a bank to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the risk of a future failure.

Peoples Exchange Bank of Monroe County scored above 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, 0.62 percent of Peoples Exchange Bank of Monroe County'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Peoples Exchange Bank of Monroe County's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

Peoples Exchange Bank of Monroe County scored 8 out of a possible 30 on Bankrate's test of earnings, coming in below the national average of 15.12.

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 Exchange Bank of Monroe County was 3.15 percent, below the national average of 8.10 percent.

The bank earned net income of $294,000 on total equity of $9.4 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.