Safe and Sound

Capitol Bank

Madison, WI
5
Star Rating
Founded in 1995, Capitol Bank is an FDIC-insured bank based in Madison, WI. The bank has equity of $38.6 million on assets of $361.4 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 49 full-time employees in 13 offices in WI, the bank holds loans and leases worth $244.6 million, $201.4 million of which are for real estate. The bank currently holds $309.9 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Capitol Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did 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 works as a buffer against losses and affords protection for depositors during times of financial trouble for the bank. It follows then that a bank's level of capital is an essential measurement of a bank's financial resilience. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, Capitol Bank received a score of 12 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Capitol Bank's Tier 1 capital ratio was 12.43 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 weather financial downturns.

Overall, Capitol Bank held equity amounting to 10.69 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

A bank with a large number of these types of assets could eventually be forced to use capital to cover losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Capitol Bank scored 40 out of a possible 40 points, better than 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, 0.13 percent of Capitol Bank's loans were noncurrent -- in other words, 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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a useful 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 Capitol Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's test of earnings, Capitol Bank scored 18 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Capitol Bank was 8.48 percent, above the national average of 8.10 percent.

The bank reported net income of $3.2 million on total equity of $38.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.91 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.