Safe and Sound

Commonwealth Bank and Trust Company

Louisville, KY
4
Star Rating
Commonwealth Bank and Trust Company is a Louisville, KY-based, FDIC-insured bank founded in 1887. As of June 30, 2017, the bank had equity of $88.5 million on assets of $972.7 million.

Thanks to the work of 295 full-time employees in 18 offices in KY, the bank holds loans and leases worth $692.6 million, $558.9 million of which are for real estate. The bank currently holds $796.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Commonwealth Bank and Trust Company 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 key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors during times of economic trouble for the bank. It follows then that a bank's level of capital is a crucial measurement of a bank's financial fortitude. From a safety and soundness perspective, the higher the capital, the better.
Commonwealth Bank and Trust Company came in below the national average of 13.38 on our test to measure the adequacy of a bank's capital, receiving a score of 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Commonwealth Bank and Trust Company's Tier 1 capital ratio was 12.30 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Commonwealth Bank and Trust Company held equity amounting to 9.09 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these types of assets could eventually have to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

Commonwealth Bank and Trust Company scored 40 out of a possible 40 points on Bankrate's asset quality test, better than the national average of 37.62.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.30 percent of Commonwealth Bank and Trust Company'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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Commonwealth Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's test of earnings, Commonwealth Bank and Trust Company scored 18 out of a possible 30, exceeding the national average of 16.52.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Commonwealth Bank and Trust Company's most recent annualized quarterly return on equity was 9.23 percent, below the national average of 9.28 percent.

The bank recorded net income of $4.0 million on total equity of $88.5 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 0.82 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.