Safe and Sound

Commerce Bank & Trust Company

Worcester, MA
4
Star Rating
Started in 1955, Commerce Bank & Trust Company is an FDIC-insured bank headquartered in Worcester, MA. As of June 30, 2017, the bank held equity of $186.2 million on assets of $1.94 billion.

With 224 full-time employees in 17 offices in MA, the bank holds loans and leases worth $1.41 billion, including real estate loans of $704.3 million. U.S. bank customers currently have $1.72 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Commerce Bank & Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial fortitude. It acts as a bulwark against losses and as protection for accountholders during periods of financial instability for the bank. When it comes to safety and soundness, more capital is better.
Commerce Bank & Trust Company finished below the national average of 13.38 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Commerce Bank & Trust Company's Tier 1 capital ratio was 11.11 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, Commerce Bank & Trust Company held equity amounting to 9.60 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

A bank with large numbers of these kinds of assets may eventually be forced to use capital to cover losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Commerce Bank & Trust Company scored 36 out of a possible 40 points, coming in below the national average of 37.62 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 1.54 percent of Commerce Bank & Trust Company'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 1.04 percent.

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

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings may be retained by the bank, increasing 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, take away from a bank's ability to do those things.

On Bankrate's test of earnings, Commerce Bank & Trust Company scored 20 out of a possible 30, beating out the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Commerce Bank & Trust Company's most recent annualized quarterly return on equity was 10.37 percent, above the national average of 9.28 percent.

The bank reported net income of $9.5 million on total equity of $186.2 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.89 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.