Safe and Sound

Bank of Commerce

Duncan, OK
5
Star Rating
Duncan, OK-based Bank of Commerce is an FDIC-insured bank founded in 2002. The bank has equity of $36.1 million on $302.0 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 65 full-time employees in 5 offices in OK, the bank currently holds loans and leases worth $230.6 million, including $128.8 million worth of real estate loans. U.S. bank customers currently have $250.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Commerce exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is valuable. It acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

Bank of Commerce exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 14 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Bank of Commerce's Tier 1 capital ratio was 12.61 percent, higher than the 6 percent level regulators consider adequate, but below 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 11.95 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these kinds of assets may eventually force a bank to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

Bank of Commerce fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.05 percent of 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 1.01 percent.

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

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, giving a boost to 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 are less able to do those things.

Bank of Commerce beat the national average on Bankrate's test of earnings, achieving a score of 20 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. Bank of Commerce's most recent annualized quarterly return on equity was 12.14 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $4.3 million on total equity of $36.1 million. The bank had an annualized return on average assets, or ROA, of 1.44 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.