Safe and Sound

Commercial Trust Company of Fayette

Fayette, MO
5
Star Rating
Fayette, MO-based Commercial Trust Company of Fayette is an FDIC-insured bank founded in 1903. As of December 31, 2017, the bank had equity of $13.0 million on $130.2 million in assets.

Thanks to the work of 30 full-time employees in 2 offices in MO, the bank has amassed loans and leases worth $81.6 million, including $67.5 million worth of real estate loans. The bank currently holds $111.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Commercial Trust Company of Fayette exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors when a bank is experiencing financial instability. It follows then that a bank's level of capital is a crucial measurement of a bank's financial strength. From a safety and soundness perspective, more capital is better.

Commercial Trust Company of Fayette finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Commercial Trust Company of Fayette's Tier 1 capital ratio was 18.52 percent, higher than the 6 percent level regulators consider adequate, but below 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 Trust Company of Fayette held equity amounting to 9.99 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets may eventually force a bank to use capital to absorb losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the chances of a future failure.

Commercial Trust Company of Fayette beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.23 percent of Commercial Trust Company of Fayette'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." 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 Commercial Trust Company of Fayette's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Commercial Trust Company of Fayette scored 22 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Commercial Trust Company of Fayette was 12.86 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.7 million on total equity of $13.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.29 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.