Safe and Sound

Commonwealth Bank and Trust Company

Louisville, KY
4
Star Rating
Commonwealth Bank and Trust Company is an FDIC-insured bank founded in 1887 and currently based in Louisville, KY. The bank has equity of $91.7 million on $989.5 million in assets, according to December 31, 2017, regulatory filings.

With 287 full-time employees in 18 offices in KY, the bank holds loans and leases worth $694.7 million, including real estate loans of $553.5 million. U.S. bank customers currently have $838.6 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial resilience. It works as a bulwark against losses and provides protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

Commonwealth Bank and Trust Company received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Commonwealth Bank and Trust Company's Tier 1 capital ratio was 12.74 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 stand up to economic difficulties.

Overall, Commonwealth Bank and Trust Company held equity amounting to 9.27 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these kinds of assets could eventually have to use capital to cover losses, cutting down on 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, resulting in reduced earnings and potentially more risk of a future failure.

Commonwealth Bank and Trust Company scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.32 percent of Commonwealth Bank and 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 below the national average of 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Commonwealth Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

Commonwealth Bank and Trust Company exceeded the national average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. Commonwealth Bank and Trust Company's most recent annualized quarterly return on equity was 10.79 percent, above the national average of 8.10 percent.

The bank earned net income of $9.5 million on total equity of $91.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.98 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.