Safe and Sound

Commonwealth National Bank

2
Star Rating
Commonwealth National Bank is an FDIC-insured bank founded in 1976 and currently headquartered in Mobile, AL. Regulatory filings show the bank having equity of $4.1 million on $49.5 million in assets, as of December 31, 2017.

U.S. bank customers have $45.2 million on deposit at 2 offices in AL run by 19 full-time employees. With that footprint, the bank holds loans and leases worth $21.2 million, including $19.7 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Commonwealth National Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for account holders during times of financial trouble for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is important. When looking at safety and soundness, the more capital, the better.

Commonwealth National Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Commonwealth National Bank's Tier 1 capital ratio was 24.81 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Commonwealth National Bank held equity amounting to 8.38 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

Having large numbers of these kinds of assets suggests a bank may have to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

Commonwealth National Bank scored 28 out of a possible 40 points on Bankrate's asset quality test, falling short of the national average of 37.49.

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, 4.50 percent of Commonwealth National Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Commonwealth National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

Commonwealth National Bank scored 0 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Commonwealth National Bank was -0.43 percent, below the national average of 8.10 percent.

The bank recorded net income of $-18,000 on total equity of $4.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of -0.03 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.