Safe and Sound

Commercial Bank

Nelson, NE
5
Star Rating
Commercial Bank is an FDIC-insured bank started in 1894 and currently headquartered in Nelson, NE. The bank holds equity of $5.8 million on $49.7 million in assets, according to December 31, 2017, regulatory filings.

With 8 full-time employees, the bank has amassed loans and leases worth $29.3 million, including real estate loans of $7.3 million. U.S. bank customers currently have $37.9 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 a breakdown of how the bank fared on the three major 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 bulwark against losses and as protection for depositors during times of economic instability for the bank. Therefore, a bank's level of capital is an essential measurement of a bank's financial fortitude. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, Commercial Bank scored 14 out of a possible 30 points, exceeding the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Commercial Bank's Tier 1 capital ratio was 14.29 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Commercial Bank held equity amounting to 11.61 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

A bank with large numbers of these types of assets could eventually have to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a future failure.

Commercial Bank did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 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, none 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 troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a handy 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, giving a boost to its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

Commercial Bank exceeded the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Commercial Bank was 8.93 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $503,000 on total equity of $5.8 million. The bank experienced an annualized return on average assets, or ROA, of 1.09 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.