Safe and Sound

Peoples Exchange Bank

Winchester, KY
4
Star Rating
Winchester, KY-based Peoples Exchange Bank is an FDIC-insured bank founded in 1912. Regulatory filings show the bank having equity of $34.2 million on $379.1 million in assets, as of December 31, 2017.

With 98 full-time employees in 10 offices in KY, the bank holds loans and leases worth $306.5 million, including real estate loans of $278.1 million. U.S. bank customers currently have $304.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Exchange Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors when a bank is experiencing economic instability. Therefore, a bank's level of capital is a valuable measurement of an institution's financial resilience. When it comes to safety and soundness, the more capital, the better.

Peoples Exchange Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Peoples Exchange Bank's Tier 1 capital ratio was 11.75 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Peoples Exchange Bank held equity amounting to 9.01 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 problem assets, such as past-due loans.

Having large numbers of these kinds of assets suggests a bank may have to use capital to cover losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, reducing earnings and increasing the risk of a future failure.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.07 percent of Peoples Exchange 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 how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Peoples Exchange Bank's loan loss allowance was 1,639.91 percent of its total noncurrent loans, exceeding the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Peoples Exchange Bank scored 16 out of a possible 30, beating out 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 was 7.63 percent, below the national average of 8.10 percent.

The bank earned net income of $2.6 million on total equity of $34.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.70 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.