Safe and Sound

First Community Bank of the Heartland, Inc.

Clinton, KY
4
Star Rating
Clinton, KY-based First Community Bank of the Heartland, Inc. is an FDIC-insured bank started in 1934. Regulatory filings show the bank having equity of $21.3 million on assets of $223.5 million, as of December 31, 2017.

With 64 full-time employees in 8 offices in multiple states, the bank currently holds loans and leases worth $136.0 million, including real estate loans of $107.9 million. U.S. bank customers currently have $181.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Community Bank of the Heartland, Inc. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark 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 strength, capital is valuable. From a safety and soundness perspective, the higher the capital, the better.

First Community Bank of the Heartland, Inc. received a score of 6 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. First Community Bank of the Heartland, Inc.'s Tier 1 capital ratio was 12.30 percent, exceeding the 6 percent level considered adequate by regulators, but lower 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 challenges.

Overall, First Community Bank of the Heartland, Inc. held equity amounting to 9.53 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

Having extensive holdings of these types of assets may eventually require a bank to use capital to cover losses, reducing its equity buffer. 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, resulting in diminished earnings and potentially more risk of a failure in the future.

First Community Bank of the Heartland, Inc. scored above the national average of 37.49 on Bankrate's test of asset quality, 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, 0.85 percent of First Community Bank of the Heartland, Inc.'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First Community Bank of the Heartland, Inc.'s loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand financial shocks. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, First Community Bank of the Heartland, Inc. scored 16 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for First Community Bank of the Heartland, Inc. was 7.82 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.7 million on total equity of $21.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.81 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.