Safe and Sound

American Bank of Commerce

Provo, UT
4
Star Rating
American Bank of Commerce is an FDIC-insured bank founded in 1996 and currently headquartered in Provo, UT. The bank has equity of $11.6 million on assets of $90.0 million, according to June 30, 2017, regulatory filings.

Thanks to the work of 29 full-time employees in 4 offices in UT, the bank has amassed loans and leases worth $61.0 million, $59.4 million of which are for real estate. The bank currently holds $78.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, American Bank of Commerce exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial strength. It acts as a cushion against losses and affords protection for accountholders during times of economic trouble for the bank. When it comes to safety and soundness, the more capital, the better.
American Bank of Commerce exceeded the national average of 13.38 points on our test to measure the adequacy of a bank's capital, racking up 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. American Bank of Commerce's Tier 1 capital ratio was 17.51 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, American Bank of Commerce held equity amounting to 12.87 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets could eventually have 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 no longer earning money, diminishing earnings and increasing the risk of a failure in the future.

American Bank of Commerce finished below the national average of 37.62 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, 1.54 percent of American Bank of Commerce'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 1.04 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the that reserve's size 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 American Bank of Commerce's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

American Bank of Commerce fell short of the national average on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for American Bank of Commerce was 7.09 percent, below the national average of 9.28 percent.

The bank reported net income of $402,000 on total equity of $11.6 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 0.91 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.