Safe and Sound

PeoplesBank

Holyoke, MA
4
Star Rating
PeoplesBank is a Holyoke, MA-based, FDIC-insured bank dating back to 1885. The bank holds equity of $213.3 million on assets of $2.36 billion, according to December 31, 2017, regulatory filings.

With 274 full-time employees in 20 offices in MA, the bank currently holds loans and leases worth $1.76 billion, including real estate loans of $1.57 billion. U.S. bank customers currently have $1.64 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, PeoplesBank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major 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 provides protection for account holders during periods of financial instability for the bank. It follows then that a bank's level of capital is a key measurement of a bank's financial resilience. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, PeoplesBank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. PeoplesBank's Tier 1 capital ratio was 12.16 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, PeoplesBank held equity amounting to 9.04 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having lots of these kinds of assets means a bank may have to use capital to absorb losses, cutting down on 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, resulting in reduced earnings and potentially more risk of a failure in the future.

PeoplesBank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

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, 0.12 percent of PeoplesBank'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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on PeoplesBank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand financial shocks. Conversely, losses lessen a bank's ability to do those things.

PeoplesBank received below-average marks on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for PeoplesBank was 6.21 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $12.8 million on total equity of $213.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.57 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.