Safe and Sound

Peru Federal Savings Bank

Peru, IL
4
Star Rating
Peru Federal Savings Bank is an FDIC-insured bank started in 1887 and currently headquartered in Peru, IL. Regulatory filings show the bank having equity of $19.0 million on $146.7 million in assets, as of December 31, 2017.

With 25 full-time employees in 2 offices in IL, the bank has amassed loans and leases worth $70.7 million, including real estate loans of $63.7 million. U.S. bank customers currently have $126.8 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is experiencing economic trouble. It follows then that when it comes to measuring an an institution's financial stability, capital is key. From a safety and soundness perspective, more capital is better.

Peru Federal Savings Bank did better than the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 16 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Peru Federal Savings Bank's Tier 1 capital ratio was 26.60 percent, higher than the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, Peru Federal Savings Bank held equity amounting to 12.94 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these kinds of assets means a bank could eventually have to use capital to absorb losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and elevating the risk of a failure in the future.

Peru Federal Savings Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.84 percent of Peru Federal Savings 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 . Comparing the reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Peru Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

Peru Federal Savings Bank scored 8 out of a possible 30 on Bankrate's test of earnings, coming in below the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Peru Federal Savings Bank's most recent annualized quarterly return on equity was 3.31 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $622,000 on total equity of $19.0 million. The bank experienced an annualized return on average assets, or ROA, of 0.43 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.