Safe and Sound

Preferred Community Bank

Fort Myers, FL
4
Star Rating
Preferred Community Bank is a Fort Myers, FL-based, FDIC-insured bank that opened its doors in 2007. As of December 31, 2017, the bank held equity of $13.4 million on assets of $117.6 million.

Thanks to the efforts of 27 full-time employees in 3 offices in FL, the bank currently holds loans and leases worth $80.0 million, including real estate loans of $80.2 million. U.S. bank customers currently have $99.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Preferred Community Bank 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 major criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is experiencing economic instability. Therefore, a bank's level of capital is a valuable measurement of a bank's financial strength. When looking at safety and soundness, the more capital, the better.

Preferred Community Bank racked up 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Preferred Community Bank's Tier 1 capital ratio was 19.67 percent, exceeding 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 economic difficulties.

Overall, Preferred Community Bank held equity amounting to 11.39 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

Having lots of these kinds of assets may eventually force a bank to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Preferred Community Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, none of Preferred 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 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 problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Preferred Community Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

Preferred Community Bank did below-average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Preferred Community Bank was 3.21 percent, below the national average of 8.10 percent.

The bank earned net income of $425,000 on total equity of $13.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.37 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.