Safe and Sound

Compass Bank

Birmingham, AL
3
Star Rating
Birmingham, AL-based Compass Bank is an FDIC-insured bank started in 1964. As of June 30, 2017, the bank had equity of $12.11 billion on $83,946,716,000 in assets.

With 9,837 full-time employees in 671 offices in multiple states, the bank has amassed loans and leases worth $59.14 billion, including real estate loans of $30.27 billion. U.S. bank customers currently have $66.22 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Compass Bank exhibited a generally satisfactory condition, earning 3 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 score American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial strength. It acts as a cushion against losses and provides protection for accountholders when a bank is experiencing financial instability. When looking at safety and soundness, the more capital, the better.
On our test to measure the adequacy of a bank's capital, Compass Bank received a score of 8 out of a possible 30 points, falling short of the national average of 13.38.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Compass Bank's Tier 1 capital ratio was 10.98 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Compass Bank held equity amounting to 14.39 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these types of assets could eventually require a bank to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 1.37 percent of Compass Bank's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the how large that reserve is to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Compass Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is 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, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Compass Bank scored 10 out of a possible 30, lower than the national average of 16.52.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Compass Bank was 4.33 percent, below the national average of 9.28 percent.

The bank reported net income of $262.9 million on total equity of $12.11 billion for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.63 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.