Safe and Sound

The Peoples Bank

Sardis, TN
4
Star Rating
Sardis, TN-based The Peoples Bank is an FDIC-insured bank founded in 1920. The bank holds equity of $7.7 million on assets of $84.0 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $75.6 million on deposit at 4 offices in TN run by 24 full-time employees. With that footprint, the bank has amassed loans and leases worth $54.8 million, $44.3 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. Here's a look at 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 is a crucial measurement of an institution's financial resilience. It acts as a bulwark against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

The Peoples Bank finished below the national average of 13.13 on our test to measure capital adequacy, racking up 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. The Peoples Bank's Tier 1 capital ratio was 18.20 percent, above 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 stand up to economic downturns.

Overall, The Peoples Bank held equity amounting to 9.11 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these kinds of assets may eventually be required to use capital to cover losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.56 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 deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. 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 long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

The Peoples Bank scored 10 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) 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 4.34 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $331,000 on total equity of $7.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.42 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.