Safe and Sound

The Peoples Bank

Rose Hill, VA
5
Star Rating
Rose Hill, VA-based The Peoples Bank is an FDIC-insured bank founded in 1920. The bank has equity of $14.5 million on $155.2 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $126.9 million on deposit at 4 offices in multiple states run by 27 full-time employees. With that footprint, the bank currently holds loans and leases worth $142.2 million, including real estate loans of $123.7 million.

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 an analysis of how the bank fared on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is useful. It acts as a cushion against losses and as protection for depositors during periods of economic trouble for the bank. From a safety and soundness perspective, the higher the capital, the better.

The Peoples Bank came in below the national average of 13.13 on our test to measure capital adequacy, racking up 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The Peoples Bank's Tier 1 capital ratio was 11.38 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, The Peoples Bank held equity amounting to 9.32 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

Having large numbers of these kinds of assets could eventually force a bank to use capital to cover losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.06 percent of The Peoples 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 to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. The Peoples Bank's loan loss allowance was 1,851.09 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

The Peoples Bank exceeded the national average on Bankrate's test of earnings, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The Peoples Bank was 15.85 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.1 million on total equity of $14.5 million. The bank experienced an annualized return on average assets, or ROA, of 1.44 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.