Safe and Sound

National Bank of Commerce

Superior, WI
5
Star Rating
Superior, WI-based National Bank of Commerce is an FDIC-insured bank founded in 1934. The bank holds equity of $71.8 million on assets of $619.5 million, according to December 31, 2017, regulatory filings.

With 126 full-time employees in 7 offices in multiple states, the bank currently holds loans and leases worth $472.5 million, including real estate loans of $340.8 million. U.S. bank customers currently have $500.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, National Bank of Commerce exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial strength, capital is important. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, National Bank of Commerce racked up 14 out of a possible 30 points, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. National Bank of Commerce's Tier 1 capital ratio was 12.85 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, National Bank of Commerce held equity amounting to 11.59 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem 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 types of assets may eventually be forced to use capital to cover losses, reducing its buffer 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, pushing down earnings and increasing the chances of a future failure.

National Bank of Commerce fell below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.26 percent of National Bank of Commerce's loans were noncurrent -- in other words, 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic 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, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial trouble. Losses, on the other hand, take away from a bank's ability to do those things.

National Bank of Commerce scored 22 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. National Bank of Commerce's most recent annualized quarterly return on equity was 13.94 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $10.0 million on total equity of $71.8 million. The bank reported an annualized return on average assets, or ROA, of 1.68 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.