Safe and Sound

Capstone Bank

Tuscaloosa, AL
4
Star Rating
Capstone Bank is an FDIC-insured bank started in 1978 and currently headquartered in Tuscaloosa, AL. Regulatory filings show the bank having equity of $58.3 million on $523,987,000 in assets, as of June 30, 2017.

Thanks to the efforts of 104 full-time employees in 8 offices in AL, the bank has amassed loans and leases worth $409.7 million, $306.3 million of which are for real estate. U.S. bank customers currently have $457.8 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Capstone Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank faired on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is key. It acts as a bulwark against losses and affords protection for depositors when a bank is experiencing financial trouble. When looking at safety and soundness, the more capital, the better.
On our test to measure capital adequacy, Capstone Bank received a score of 12 out of a possible 30 points, lower than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Capstone Bank's Tier 1 capital ratio was 12.38 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Capstone Bank held equity amounting to 11.13 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets suggests a bank may 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 interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Capstone Bank scored 40 out of a possible 40 points, above the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 0.63 percent of Capstone 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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Capstone 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, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Capstone Bank scored 16 out of a possible 30, less than the national average of 16.52.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for Capstone Bank was 7.24 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $2.1 million on total equity of $58.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.81 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.