Safe and Sound

Peoples Independent Bank

Boaz, AL
4
Star Rating
Founded in 1988, Peoples Independent Bank is an FDIC-insured bank headquartered in Boaz, AL. The bank holds equity of $30.7 million on assets of $315.9 million, according to December 31, 2017, regulatory filings.

With 86 full-time employees in 9 offices in AL, the bank currently holds loans and leases worth $122.5 million, including real estate loans of $98.9 million. U.S. bank customers currently have $281.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Independent Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is experiencing financial instability. It follows then that when it comes to measuring an an institution's financial fortitude, capital is important. When looking at safety and soundness, more capital is preferred.

Peoples Independent Bank finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Peoples Independent Bank's Tier 1 capital ratio was 14.59 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, Peoples Independent Bank held equity amounting to 9.71 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having a large number of these types of assets could eventually require a bank to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and elevating the chances of a future failure.

Peoples Independent Bank scored below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 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, 0.46 percent of Peoples Independent 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve 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. Unfortunately, the FDIC did not provide information on Peoples Independent Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money are less able to do those things.

Peoples Independent Bank outperformed the average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Peoples Independent Bank's most recent annualized quarterly return on equity was 11.01 percent, above the national average of 8.10 percent.

The bank reported net income of $2.9 million on total equity of $30.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.08 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.