Safe and Sound

The First Commonwealth Bank of Prestonsburg, Inc.

Prestonsburg, KY
4
Star Rating
Prestonsburg, KY-based The First Commonwealth Bank of Prestonsburg, Inc. is an FDIC-insured bank started in 1904. As of December 31, 2017, the bank held equity of $34.8 million on $321.5 million in assets.

U.S. bank customers have $255.8 million on deposit at 13 offices in KY run by 96 full-time employees. With that footprint, the bank holds loans and leases worth $146.3 million, $122.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, The First Commonwealth Bank of Prestonsburg, Inc. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to score U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial fortitude. It works as a bulwark against losses and affords protection for accountholders when a bank is experiencing economic instability. When it comes to safety and soundness, the higher the capital, the better.

The First Commonwealth Bank of Prestonsburg, Inc. received a score of 12 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First Commonwealth Bank of Prestonsburg, Inc.'s Tier 1 capital ratio was 20.95 percent, higher than 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 stand up to economic challenges.

Overall, The First Commonwealth Bank of Prestonsburg, Inc. held equity amounting to 10.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due loans.

Having a large number of these types of assets may eventually require a bank to use capital to absorb losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, The First Commonwealth Bank of Prestonsburg, Inc. scored 36 out of a possible 40 points, falling short of the national average of 37.49 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, 2.04 percent of The First Commonwealth Bank of Prestonsburg, 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The First Commonwealth Bank of Prestonsburg, Inc.'s loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. Conversely, losses take away from a bank's ability to do those things.

The First Commonwealth Bank of Prestonsburg, Inc. scored 20 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for The First Commonwealth Bank of Prestonsburg, Inc. was 10.90 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.7 million on total equity of $34.8 million. The bank had an annualized return on average assets, or ROA, of 1.18 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.