Safe and Sound

Commerce Bank of Temecula Valley

Murrieta, CA
5
Star Rating
Commerce Bank of Temecula Valley is a Murrieta, CA-based, FDIC-insured bank dating back to 2007. The bank has equity of $13.3 million on assets of $76.2 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 18 full-time employees, the bank has amassed loans and leases worth $51.5 million, including real estate loans of $44.0 million. The bank currently holds $62.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Commerce Bank of Temecula Valley exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial stability, capital is important. When it comes to safety and soundness, the more capital, the better.

Commerce Bank of Temecula Valley exceeded the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 26 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Commerce Bank of Temecula Valley's Tier 1 capital ratio was 19.25 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Commerce Bank of Temecula Valley held equity amounting to 17.48 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

A bank with extensive holdings of these types of assets may eventually have to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Commerce Bank of Temecula Valley'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 maintain 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 Commerce Bank of Temecula Valley'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. Losses, on the other hand, reduce a bank's ability to do those things.

Commerce Bank of Temecula Valley fell short of the national average on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Commerce Bank of Temecula Valley was 1.35 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $179,000 on total equity of $13.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.24 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.