Safe and Sound

Western Commerce Bank

Carlsbad, NM
5
Star Rating
Western Commerce Bank is a Carlsbad, NM-based, FDIC-insured bank started in 1961. The bank holds equity of $37.6 million on assets of $415.7 million, according to December 31, 2017, regulatory filings.

With 93 full-time employees in 12 offices in NM, the bank has amassed loans and leases worth $194.8 million, including real estate loans of $138.6 million. U.S. bank customers currently have $377.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Western Commerce Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared 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 bulwark against losses and provides protection for depositors during times of economic trouble for the bank. It follows then that when it comes to measuring an an institution's financial strength, capital is useful. When looking at safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Western Commerce Bank received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Western Commerce Bank's Tier 1 capital ratio was 18.60 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, Western Commerce Bank held equity amounting to 9.05 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is 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 loans.

Having lots of these kinds of assets suggests a bank could eventually 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 money, resulting in diminished earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.65 percent of Western Commerce Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Western Commerce Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

Western Commerce Bank outperformed the average on Bankrate's test of earnings, achieving a score of 26 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important measure of a bank's earnings. Western Commerce Bank's most recent annualized quarterly return on equity was 17.12 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $6.1 million on total equity of $37.6 million. The bank reported an annualized return on average assets, or ROA, of 1.52 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.