Safe and Sound

Bank of Commerce

Mclean, TX
5
Star Rating
Bank of Commerce is an FDIC-insured bank started in 1984 and currently headquartered in Mclean, TX. The bank has equity of $7.1 million on assets of $45.9 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 10 full-time employees in 2 offices in TX, the bank currently holds loans and leases worth $28.0 million, including $12.8 million worth of real estate loans. The bank currently holds $38.5 million in deposits from U.S. customers.

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 an analysis of how the bank fared on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It works as a bulwark against losses and provides protection for depositors during periods of economic instability for the bank. When looking at 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, achieving a score of 22 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 22.79 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Bank of Commerce held equity amounting to 15.39 percent of its assets, which exceeded 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 loans.

A bank with lots of these kinds of assets could eventually be required to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, reducing earnings and increasing the chances of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.05 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . 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 long-term survivability. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Bank of Commerce exceeded the national average on Bankrate's test of earnings, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Bank of Commerce was 15.62 percent, above the national average of 8.10 percent.

The bank earned net income of $1.0 million on total equity of $7.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 2.17 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.