Safe and Sound

Commonwealth Community Bank, Inc.

Hartford, KY
5
Star Rating
Commonwealth Community Bank, Inc. is a Hartford, KY-based, FDIC-insured bank dating back to 1928. The bank has equity of $20.1 million on $147.0 million in assets, according to December 31, 2017, regulatory filings.

With 33 full-time employees in 4 offices in KY, the bank holds loans and leases worth $37.5 million, including real estate loans of $33.3 million. U.S. bank customers currently have $122.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Commonwealth Community Bank, Inc. exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major 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

Capital works as a cushion against losses and affords protection for depositors during periods of financial instability for the bank. It follows then that when it comes to measuring an a bank's financial stability, capital is important. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Commonwealth Community Bank, Inc. achieved a score of 18 out of a possible 30 points, beating out the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Commonwealth Community Bank, Inc.'s Tier 1 capital ratio was 39.79 percent, exceeding the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Commonwealth Community Bank, Inc. held equity amounting to 13.68 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these kinds of assets may eventually have to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and elevating the chances of a future failure.

Commonwealth Community Bank, Inc. scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

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, 1.30 percent of Commonwealth Community Bank, Inc.'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is 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 Commonwealth Community Bank, Inc.'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 put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Commonwealth Community Bank, Inc. underperformed the average on Bankrate's earnings test, achieving a score of 12 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Commonwealth Community Bank, Inc. was 4.99 percent, below the national average of 8.10 percent.

The bank earned net income of $1.0 million on total equity of $20.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.70 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.