Safe and Sound

Commerce Bank

Corinth, MS
5
Star Rating
Commerce Bank is a Corinth, MS-based, FDIC-insured bank started in 1999. As of December 31, 2017, the bank held equity of $12.7 million on assets of $113.1 million.

With 26 full-time employees, the bank currently holds loans and leases worth $72.7 million, including real estate loans of $53.8 million. U.S. bank customers currently have $100.2 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

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

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

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Commerce Bank's Tier 1 capital ratio was 18.22 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Commerce Bank held equity amounting to 11.19 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

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

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.43 percent of Commerce Bank'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." 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's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Commerce Bank scored 26 out of a possible 30, exceeding the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Commerce Bank's most recent annualized quarterly return on equity was 17.05 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $2.2 million on total equity of $12.7 million. The bank reported an annualized return on average assets, or ROA, of 1.96 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.