Safe and Sound

The Peoples Bank

Magnolia, AR
4
Star Rating
Founded in 1910, The Peoples Bank is an FDIC-insured bank headquartered in Magnolia, AR. As of December 31, 2017, the bank held equity of $19.1 million on $200.0 million in assets.

With 55 full-time employees in 3 offices in AR, the bank has amassed loans and leases worth $131.3 million, including real estate loans of $92.1 million. U.S. bank customers currently have $138.9 million in deposits with the bank.

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 major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

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

On our test to measure the adequacy of a bank's capital, The Peoples Bank received a score of 10 out of a possible 30 points, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Peoples Bank's Tier 1 capital ratio was 16.61 percent, higher than the 6 percent level considered adequate by regulators, 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 difficulties.

Overall, The Peoples Bank held equity amounting to 9.53 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 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, cutting down on 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, diminishing earnings and elevating the chances of a future failure.

The Peoples Bank scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 2.03 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 above the national average of 1.01 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem 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 affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, The Peoples Bank scored 24 out of a possible 30, better than 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 total equity. The Peoples Bank's most recent annualized quarterly return on equity was 16.10 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.0 million on total equity of $19.1 million. The bank had an annualized return on average assets, or ROA, of 1.56 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.