Safe and Sound

National Bank of Commerce

Birmingham, AL
4
Star Rating
Birmingham, AL-based National Bank of Commerce is an FDIC-insured bank started in 2004. The bank has equity of $386.3 million on $2.74 billion in assets, according to December 31, 2017, regulatory filings.

With 426 full-time employees in 25 offices in multiple states, the bank currently holds loans and leases worth $2.15 billion, including real estate loans of $1.74 billion. U.S. bank customers currently have $2.32 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, National Bank of Commerce exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial strength, capital is essential. When it comes to safety and soundness, the more capital, the better.

National Bank of Commerce came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. National Bank of Commerce's Tier 1 capital ratio was 11.92 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, National Bank of Commerce held equity amounting to 13.86 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets may eventually have to use capital to absorb losses, diminishing its cushion of equity. 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.

National Bank of Commerce scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.16 percent of National Bank of Commerce'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size 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 National Bank of Commerce's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, National Bank of Commerce scored 12 out of a possible 30, below the national average of 15.12.

One widely used measure of 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 National Bank of Commerce was 6.86 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $22.1 million on total equity of $386.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.91 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.