Safe and Sound

The Peoples Bank

Mount Washington, KY
5
Star Rating
Mount Washington, KY-based The Peoples Bank is an FDIC-insured bank founded in 1909. Regulatory filings show the bank having equity of $10.5 million on $84.9 million in assets, as of December 31, 2017.

Thanks to the work of 23 full-time employees in 2 offices in KY, the bank holds loans and leases worth $52.6 million, including $50.4 million worth of real estate loans. U.S. bank customers currently have $73.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Peoples 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 grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors during times of financial instability for the bank. It follows then that a bank's level of capital is an important measurement of an institution's financial strength. When looking at safety and soundness, the higher the capital, the better.

The Peoples Bank achieved a score of 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. The Peoples Bank's Tier 1 capital ratio was 17.62 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, The Peoples Bank held equity amounting to 12.35 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets could eventually be required to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.05 percent of The Peoples Bank'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 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 at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. The Peoples Bank's loan loss allowance was 2,812.00 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, The Peoples Bank scored 20 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for The Peoples Bank was 11.16 percent, above the national average of 8.10 percent.

The bank earned net income of $1.2 million on total equity of $10.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.36 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.