Safe and Sound

The Commercial National Bank of Brady

Brady, TX
5
Star Rating
The Commercial National Bank of Brady is an FDIC-insured bank founded in 1907 and currently headquartered in Brady, TX. The bank has equity of $17.9 million on $178.0 million in assets, according to December 31, 2017, regulatory filings.

With 34 full-time employees in 2 offices in TX, the bank currently holds loans and leases worth $80.9 million, including real estate loans of $64.2 million. U.S. bank customers currently have $160.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Commercial National Bank of Brady exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors during periods of financial instability for the bank. It follows then that when it comes to measuring an a bank's financial stability, capital is key. When it comes to safety and soundness, the more capital, the better.

The Commercial National Bank of Brady received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Commercial National Bank of Brady's Tier 1 capital ratio was 20.09 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, The Commercial National Bank of Brady held equity amounting to 10.04 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

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

The Commercial National Bank of Brady scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than 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, 0.02 percent of The Commercial National Bank of Brady'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 deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. The Commercial National Bank of Brady's loan loss allowance was 7,212.50 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

The Commercial National Bank of Brady beat the national average on Bankrate's test of earnings, achieving a score of 26 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The Commercial National Bank of Brady's most recent annualized quarterly return on equity was 15.66 percent, above the national average of 8.10 percent.

The bank reported net income of $2.9 million on total equity of $17.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.66 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.