Safe and Sound

The Peoples Bank

Pratt, KS
5
Star Rating
Started in 1887, The Peoples Bank is an FDIC-insured bank based in Pratt, KS. Regulatory filings show the bank having equity of $50.0 million on assets of $362.1 million, as of December 31, 2017.

With 82 full-time employees in 9 offices in KS, the bank has amassed loans and leases worth $224.8 million, including real estate loans of $101.2 million. U.S. bank customers currently have $301.8 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 fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is important. It works as a bulwark against losses and as protection for accountholders when a bank is experiencing financial trouble. From a safety and soundness perspective, the higher the capital, the better.

The Peoples Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 14 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. The Peoples Bank's Tier 1 capital ratio was 16.75 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, The Peoples Bank held equity amounting to 13.81 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets may eventually be forced to use capital to absorb losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

The Peoples Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.42 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 troubled assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The Peoples Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, 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.

The Peoples Bank outperformed the average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The Peoples Bank's most recent annualized quarterly return on equity was 9.93 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $5.0 million on total equity of $50.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.40 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.