Safe and Sound

Canton State Bank

4
Star Rating
Canton, MO-based Canton State Bank is an FDIC-insured bank founded in 1935. The bank holds equity of $3.3 million on assets of $32.6 million, according to December 31, 2017, regulatory filings.

With 11 full-time employees, the bank has amassed loans and leases worth $18.9 million, including real estate loans of $15.2 million. U.S. bank customers currently have $27.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Canton State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors during periods of financial instability for the bank. It follows then that a bank's level of capital is a valuable measurement of a bank's financial resilience. When it comes to safety and soundness, the more capital, the better.

Canton State Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Canton State Bank's Tier 1 capital ratio was 16.85 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Canton State Bank held equity amounting to 10.24 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 effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets means a bank could have to use capital to cover losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, Canton State Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

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, 0.92 percent of Canton State 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 troubled 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 at-risk loans. Unfortunately, the FDIC did not provide information on Canton State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Canton State Bank scored 4 out of a possible 30, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Canton State Bank's most recent annualized quarterly return on equity was 1.60 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $53,000 on total equity of $3.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.17 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.