Safe and Sound

The Commercial Bank of Grayson

Grayson, KY
5
Star Rating
The Commercial Bank of Grayson is an FDIC-insured bank started in 1891 and currently based in Grayson, KY. Regulatory filings show the bank having equity of $25.1 million on $175.7 million in assets, as of December 31, 2017.

With 59 full-time employees in 3 offices in KY, the bank currently holds loans and leases worth $71.3 million, including real estate loans of $47.8 million. U.S. bank customers currently have $149.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Commercial Bank of Grayson exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an an institution's financial fortitude, capital is essential. When it comes to safety and soundness, the more capital, the better.

The Commercial Bank of Grayson achieved a score of 20 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Commercial Bank of Grayson's Tier 1 capital ratio was 26.15 percent, exceeding the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, The Commercial Bank of Grayson held equity amounting to 14.29 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets means a bank may have to use capital to absorb losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a failure in the future.

The Commercial Bank of Grayson scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding 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, 2.13 percent of The Commercial Bank of Grayson'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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy 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 The Commercial Bank of Grayson's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

The Commercial Bank of Grayson scored 12 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The Commercial Bank of Grayson's most recent annualized quarterly return on equity was 4.94 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.3 million on total equity of $25.1 million. The bank experienced an annualized return on average assets, or ROA, of 0.71 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.