Safe and Sound

Capitol National Bank

Lansing, MI
3
Star Rating
Lansing, MI-based Capitol National Bank is an FDIC-insured bank started in 1982. As of December 31, 2017, the bank had equity of $13.8 million on $115.0 million in assets.

Thanks to the work of 30 full-time employees in 3 offices in MI, the bank holds loans and leases worth $87.6 million, including $70.0 million worth of real estate loans. The bank currently holds $101.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Capitol National 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 cushion against losses and as protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a key measurement of an institution's financial resilience. When looking at safety and soundness, more capital is better.

On our test to measure capital adequacy, Capitol National Bank racked up 14 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Capitol National Bank's Tier 1 capital ratio was 15.49 percent, exceeding 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 difficulties.

Overall, Capitol National 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

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

A bank with a large number of these types of assets could eventually have to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

Capitol National Bank fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 36 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, 2.17 percent of Capitol National 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 . The size of that reserve 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 National 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. A bank can retain its earnings, giving a boost to its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand financial trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Capitol National Bank fell short of the national average on Bankrate's earnings test, achieving a score of 0 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. Capitol National Bank's most recent annualized quarterly return on equity was -3.06 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $-439,000 on total equity of $13.8 million. The bank reported an annualized return on average assets, or ROA, of -0.37 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.