Safe and Sound

Peoples Southern Bank

Clanton, AL
5
Star Rating
Started in 1901, Peoples Southern Bank is an FDIC-insured bank headquartered in Clanton, AL. As of December 31, 2017, the bank held equity of $22.7 million on $181.2 million in assets.

Thanks to the efforts of 43 full-time employees in 3 offices in AL, the bank currently holds loans and leases worth $58.0 million, $42.3 million of which are for real estate. The bank currently holds $158.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Peoples Southern Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is important. It acts as a cushion against losses and as protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is better.

Peoples Southern Bank beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 16 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Peoples Southern Bank's Tier 1 capital ratio was 28.13 percent, above the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Peoples Southern Bank held equity amounting to 12.54 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 problem assets, such as past-due mortgages.

Having extensive holdings of these types of assets means a bank could have to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and elevating the risk of a future failure.

Peoples Southern Bank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.24 percent of Peoples Southern 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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Peoples Southern Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

Peoples Southern Bank did above-average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Peoples Southern Bank was 8.17 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.9 million on total equity of $22.7 million. The bank had an annualized return on average assets, or ROA, of 1.06 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.