Safe and Sound

American Bank of Commerce

Wolfforth, TX
4
Star Rating
Founded in 1962, American Bank of Commerce is an FDIC-insured bank headquartered in Wolfforth, TX. The bank has equity of $76.7 million on $901.4 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $805.1 million on deposit at 16 offices in multiple states run by 166 full-time employees. With that footprint, the bank holds loans and leases worth $544.9 million, $451.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, American Bank of Commerce 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 important criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for account holders when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a crucial measurement of a bank's financial resilience. From a safety and soundness perspective, more capital is better.

On our test to measure capital adequacy, American Bank of Commerce received a score of 8 out of a possible 30 points, below the national average of 13.13.

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 11.89 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, American Bank of Commerce held equity amounting to 8.51 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 mortgages.

Having lots of these kinds of assets could eventually require a bank to use capital to cover losses, reducing 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 future failure.

On Bankrate's asset quality test, American Bank of Commerce scored 40 out of a possible 40 points, better than the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.13 percent of American Bank of Commerce's loans were noncurrent, meaning 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on American Bank of Commerce's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

American Bank of Commerce scored 12 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. American Bank of Commerce's most recent annualized quarterly return on equity was 5.43 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $4.2 million on total equity of $76.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.47 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.