Safe and Sound

Commercial Bank

Parsons, KS
5
Star Rating
Founded in 1874, Commercial Bank is an FDIC-insured bank headquartered in Parsons, KS. As of December 31, 2017, the bank had equity of $29.0 million on $329.1 million in assets.

With 74 full-time employees in 9 offices in KS, the bank has amassed loans and leases worth $121.2 million, including real estate loans of $67.9 million. U.S. bank customers currently have $299.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Commercial 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 important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an a bank's financial strength, capital is important. When it comes to safety and soundness, the higher the capital, the better.

Commercial Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Commercial Bank's Tier 1 capital ratio was 16.39 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Commercial Bank held equity amounting to 8.82 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 effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these kinds of assets may eventually be required to use capital to cover losses, shrinking its equity cushion. 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 diminished earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.28 percent of Commercial 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 maintain a reserve to deal with 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 widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Commercial Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. Banks that are losing money, however, have less ability to do those things.

Commercial Bank received above-average marks on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. Commercial Bank's most recent annualized quarterly return on equity was 13.18 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.9 million on total equity of $29.0 million. The bank had an annualized return on average assets, or ROA, of 1.18 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.