Safe and Sound

Commerce Bank

Geneva, MN
3
Star Rating
Geneva, MN-based Commerce Bank is an FDIC-insured bank founded in 1915. Regulatory filings show the bank having equity of $25.2 million on $194.1 million in assets, as of December 31, 2017.

U.S. bank customers have $142.7 million on deposit at 2 offices in MN run by 18 full-time employees. With that footprint, the bank holds loans and leases worth $154.9 million, $111.2 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Commerce Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors when a bank is experiencing financial instability. It follows then that a bank's level of capital is an important measurement of an institution's financial resilience. When looking at safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Commerce Bank racked up 16 out of a possible 30 points, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Commerce Bank's Tier 1 capital ratio was 15.45 percent, above 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 downturns.

Overall, Commerce Bank held equity amounting to 12.98 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

A bank with lots of these types of assets could eventually have to use capital to cover losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Commerce Bank scored 24 out of a possible 40 points, failing to reach the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.43 percent of Commerce Bank'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 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 helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Commerce Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Commerce Bank scored 14 out of a possible 30, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. Commerce Bank's most recent annualized quarterly return on equity was 6.28 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.6 million on total equity of $25.2 million. The bank had an annualized return on average assets, or ROA, of 0.87 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.