Safe and Sound

Commerce Bank

Laredo, TX
5
Star Rating
Commerce Bank is an FDIC-insured bank started in 1982 and currently headquartered in Laredo, TX. As of December 31, 2017, the bank held equity of $85.3 million on assets of $535.3 million.

U.S. bank customers have $444.4 million on deposit at 4 offices in TX run by 50 full-time employees. With that footprint, the bank currently holds loans and leases worth $172.7 million, including $146.3 million worth of real estate loans.

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 a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial strength. It works as a buffer against losses and provides protection for depositors during times of financial instability for the bank. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Commerce Bank achieved a score of 20 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 33.22 percent, higher than the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Commerce Bank held equity amounting to 15.94 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets could eventually force a bank to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 2.72 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 above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. 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 has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Commerce Bank outperformed the average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Commerce Bank was 10.27 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $8.6 million on total equity of $85.3 million. The bank reported an annualized return on average assets, or ROA, of 1.50 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.