Safe and Sound

First Community Bank of Central Alabama

Wetumpka, AL
5
Star Rating
Started in 2001, First Community Bank of Central Alabama is an FDIC-insured bank based in Wetumpka, AL. The bank has equity of $27.8 million on assets of $362.5 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $331.1 million on deposit at 7 offices in AL run by 75 full-time employees. With that footprint, the bank currently holds loans and leases worth $227.7 million, including real estate loans of $182.5 million.

Overall, Bankrate believes that, as of December 31, 2017, First Community Bank of Central Alabama exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to evaluate 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 a bank's financial fortitude, capital is valuable. It works as a bulwark against losses and affords protection for accountholders when a bank is experiencing economic instability. When looking at safety and soundness, more capital is better.

First Community Bank of Central Alabama finished below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 6 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Community Bank of Central Alabama's Tier 1 capital ratio was 10.59 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, First Community Bank of Central Alabama held equity amounting to 7.68 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 capitalization and allocated loan loss reserves.

A bank with large numbers of these kinds of assets may eventually be forced to use capital to absorb losses, decreasing 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, reducing earnings and increasing the risk of a future failure.

First Community Bank of Central Alabama exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 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, 0.13 percent of First Community Bank of Central Alabama'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. First Community Bank of Central Alabama's loan loss allowance was 1,731.13 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial shocks. However, banks that are losing money are less able to do those things.

First Community Bank of Central Alabama did above-average on Bankrate's earnings test, achieving a score of 30 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for First Community Bank of Central Alabama was 25.11 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $7.0 million on total equity of $27.8 million. The bank had an annualized return on average assets, or ROA, of 1.97 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.