Safe and Sound

Cambridge State Bank

Cambridge, MN
3
Star Rating
Cambridge State Bank is an FDIC-insured bank founded in 1914 and currently based in Cambridge, MN. The bank holds equity of $8.8 million on assets of $73.4 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $64.5 million on deposit at 4 offices in MN run by 15 full-time employees. With that footprint, the bank holds loans and leases worth $44.1 million, including real estate loans of $30.8 million.

Overall, Bankrate believes that, as of December 31, 2017, Cambridge State Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial resilience, capital is valuable. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Cambridge State Bank scored 16 out of a possible 30 points, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Cambridge State Bank's Tier 1 capital ratio was 19.15 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 suggests the bank will be better able to stand up to economic challenges.

Overall, Cambridge State Bank held equity amounting to 12.03 percent of its assets, which was equal to the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these types of assets means a bank may eventually have to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and elevating the risk of a failure in the future.

Cambridge State Bank fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 24 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.82 percent of Cambridge State Bank's loans were noncurrent, meaning 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 troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Cambridge State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand financial shocks. Banks that are losing money, however, have less ability to do those things.

Cambridge State Bank did below-average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Cambridge State Bank's most recent annualized quarterly return on equity was 5.99 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $525,000 on total equity of $8.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.74 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.