Safe and Sound

First Commonwealth Bank

Indiana, PA
4
Star Rating
Founded in 1880, First Commonwealth Bank is an FDIC-insured bank headquartered in Indiana, PA. The bank holds equity of $911.0 million on assets of $7.36 billion, according to June 30, 2017, regulatory filings.

U.S. bank customers have $5.55 billion on deposit at 137 offices in multiple states run by 1,426 full-time employees. With that footprint, the bank holds loans and leases worth $5.34 billion, including $3.64 billion worth of real estate loans.

Overall, Bankrate believes that, as of June 30, 2017, First Commonwealth Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank faired on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for depositors during times of economic instability for the bank. Therefore, when it comes to measuring an an institution's financial strength, capital is key. When it comes to safety and soundness, the higher the capital, the better.
First Commonwealth Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Commonwealth Bank's Tier 1 capital ratio was 10.79 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, First Commonwealth Bank held equity amounting to 12.38 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets means a bank could eventually have to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a future failure.

First Commonwealth Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 0.54 percent of First Commonwealth 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 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a useful 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 First Commonwealth 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. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. However, banks that are losing money have less ability to do those things.

First Commonwealth Bank scored 16 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 16.52.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for First Commonwealth Bank was 8.04 percent, below the national average of 9.28 percent.

The bank recorded net income of $32.3 million on total equity of $911.0 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.93 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.