Safe and Sound

Commercial Bank

Whitewater, WI
4
Star Rating
Whitewater, WI-based Commercial Bank is an FDIC-insured bank started in 1913. As of June 30, 2017, the bank had equity of $10.2 million on assets of $95.8 million.

Thanks to the efforts of 21 full-time employees in 4 offices in WI, the bank holds loans and leases worth $32.4 million, including real estate loans of $28.3 million. The bank currently holds $83.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Commercial Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank faired on the three major criteria Bankrate used to score American banks.

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 when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a key measurement of a bank's financial strength. When it comes to safety and soundness, more capital is preferred.
Commercial Bank came in below the national average of 13.38 on our test to measure capital adequacy, racking up 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Commercial Bank's Tier 1 capital ratio was 29.56 percent, higher than the 6 percent level considered adequate by regulators, and higher than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Commercial Bank held equity amounting to 10.63 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due mortgages, 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 could eventually be forced to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, decreasing earnings and increasing the risk of a failure in the future.

Commercial Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.62.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.15 percent of Commercial Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the that reserve's size to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Commercial Bank's loan loss allowance was 939.58 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

Commercial Bank scored 4 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 16.52.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Commercial Bank was 1.07 percent, below the national average of 9.28 percent.

The bank recorded net income of $54,000 on total equity of $10.2 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.11 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.