Safe and Sound

Bank of Commerce

Chelsea, OK
3
Star Rating
Bank of Commerce is a Chelsea, OK-based, FDIC-insured bank started in 1896. The bank holds equity of $17.9 million on assets of $143.8 million, according to December 31, 2017, regulatory filings.

With 53 full-time employees in 6 offices in OK, the bank currently holds loans and leases worth $95.7 million, including real estate loans of $73.7 million. U.S. bank customers currently have $124.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Commerce exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for account holders during times of financial trouble for the bank. Therefore, when it comes to measuring an an institution's financial strength, capital is valuable. When it comes to safety and soundness, more capital is better.

Bank of Commerce exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 16 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Bank of Commerce's Tier 1 capital ratio was 17.58 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, Bank of Commerce held equity amounting to 12.45 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these kinds of assets means a bank may eventually have to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Bank of Commerce scored 28 out of a possible 40 points on Bankrate's asset quality test, below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 3.46 percent of Bank of Commerce'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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Bank of Commerce's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's test of earnings, Bank of Commerce scored 8 out of a possible 30, coming in below the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Bank of Commerce's most recent annualized quarterly return on equity was 3.05 percent, below the national average of 8.10 percent.

The bank reported net income of $541,000 on total equity of $17.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.38 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.