Safe and Sound

Prairie Community Bank

Marengo, IL
3
Star Rating
Started in 1998, Prairie Community Bank is an FDIC-insured bank based in Marengo, IL. Regulatory filings show the bank having equity of $12.6 million on $114.4 million in assets, as of December 31, 2017.

Thanks to the efforts of 29 full-time employees in 2 offices in IL, the bank has amassed loans and leases worth $81.2 million, including $67.5 million worth of real estate loans. The bank currently holds $100.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Prairie Community Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial strength. It acts as a bulwark against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Prairie Community Bank achieved a score of 14 out of a possible 30 points, beating the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Prairie Community Bank's Tier 1 capital ratio was 13.97 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial downturns.

Overall, Prairie Community Bank held equity amounting to 11.00 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets suggests a bank may eventually have to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the chances of a failure in the future.

On Bankrate's test of asset quality, Prairie Community Bank scored 28 out of a possible 40 points, less than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 2.79 percent of Prairie Community 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 maintain 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 Prairie Community Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

Prairie Community Bank scored 6 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Prairie Community Bank was 2.53 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $319,000 on total equity of $12.6 million. The bank had an annualized return on average assets, or ROA, of 0.28 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.