Safe and Sound

Commercial Bank & Trust Company

Monticello, AR
4
Star Rating
Founded in 1913, Commercial Bank & Trust Company is an FDIC-insured bank based in Monticello, AR. As of December 31, 2017, the bank held equity of $18.1 million on $210.4 million in assets.

U.S. bank customers have $174.4 million on deposit at 5 offices in AR run by 40 full-time employees. With that footprint, the bank currently holds loans and leases worth $121.2 million, including $76.2 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Commercial Bank & Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for depositors during periods of economic instability for the bank. Therefore, when it comes to measuring an an institution's financial strength, capital is key. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Commercial Bank & Trust Company received a score of 8 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Commercial Bank & Trust Company's Tier 1 capital ratio was 14.25 percent, higher than 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 financial challenges.

Overall, Commercial Bank & Trust Company held equity amounting to 8.61 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to absorb losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

Commercial Bank & Trust Company fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.24 percent of Commercial 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 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Commercial Bank & Trust Company'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, increasing its capital cushion, or be used to address 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, Commercial Bank & Trust Company scored 24 out of a possible 30, beating out the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for Commercial Bank & Trust Company was 15.88 percent, above the national average of 8.10 percent.

The bank earned net income of $2.9 million on total equity of $18.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.43 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.