Safe and Sound

The Peoples Bank

Marion, KY
4
Star Rating
The Peoples Bank is a Marion, KY-based, FDIC-insured bank dating back to 1946. Regulatory filings show the bank having equity of $4.5 million on $46.8 million in assets, as of December 31, 2017.

U.S. bank customers have $41.3 million on deposit at 3 offices in KY run by 14 full-time employees. With that footprint, the bank holds loans and leases worth $39.9 million, $21.0 million of which are for real estate.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is experiencing economic trouble. Therefore, a bank's level of capital is a useful measurement of a bank's financial strength. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, The Peoples Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. The Peoples Bank's Tier 1 capital ratio was 11.01 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, The Peoples Bank held equity amounting to 9.69 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets means a bank may have to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, The Peoples Bank scored 32 out of a possible 40 points, failing to reach the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.15 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 above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled 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 troubled assets. Unfortunately, the FDIC did not provide information on The Peoples Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

The Peoples Bank scored 18 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for The Peoples Bank was 9.23 percent, above the national average of 8.10 percent.

The bank recorded net income of $408,000 on total equity of $4.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.91 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.