Safe and Sound

The Peoples Bank of Red Level

Red Level, AL
4
Star Rating
Red Level, AL-based The Peoples Bank of Red Level is an FDIC-insured bank founded in 1914. Regulatory filings show the bank having equity of $1.8 million on assets of $16.0 million, as of December 31, 2017.

With 6 full-time employees, the bank currently holds loans and leases worth $6.0 million, including real estate loans of $2.5 million. U.S. bank customers currently have $14.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Peoples Bank of Red Level exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors during periods of financial instability for the bank. Therefore, a bank's level of capital is a useful measurement of an institution's financial strength. When it comes to safety and soundness, more capital is better.

On our test to measure capital adequacy, The Peoples Bank of Red Level racked up 14 out of a possible 30 points, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Peoples Bank of Red Level's Tier 1 capital ratio was 23.18 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, The Peoples Bank of Red Level held equity amounting to 11.54 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 effect of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these kinds of assets may eventually force a bank to use capital to cover losses, decreasing its buffer of equity. 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 increasing the chances of a future failure.

The Peoples Bank of Red Level finished below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 3.69 percent of The Peoples Bank of Red Level's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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 how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Peoples Bank of Red Level'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 deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

The Peoples Bank of Red Level did above-average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for The Peoples Bank of Red Level was 7.14 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $135,000 on total equity of $1.8 million. The bank reported an annualized return on average assets, or ROA, of 0.82 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.