Safe and Sound

Charter Bank

Biloxi, MS
2
Star Rating
Charter Bank is a Biloxi, MS-based, FDIC-insured bank started in 2008. The bank holds equity of $14.1 million on assets of $150.5 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $122.5 million on deposit at 4 offices in MS run by 38 full-time employees. With that footprint, the bank currently holds loans and leases worth $101.7 million, including real estate loans of $80.7 million.

Overall, Bankrate believes that, as of December 31, 2017, Charter Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial fortitude. It acts as a bulwark against losses and as protection for depositors during times of economic trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.

Charter Bank fell below the national average of 13.13 on our test to measure capital adequacy, scoring 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Charter Bank's Tier 1 capital ratio was 12.54 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, Charter Bank held equity amounting to 9.33 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 capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

A bank with lots of these types of assets may eventually have to use capital to absorb losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and increasing the chances of a failure in the future.

On Bankrate's test of asset quality, Charter Bank scored 32 out of a possible 40 points, lower than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.03 percent of Charter 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 to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Charter Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Charter Bank scored 0 out of a possible 30, less 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 important measure of a bank's earnings. Charter Bank's most recent annualized quarterly return on equity was -4.68 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $-687,000 on total equity of $14.1 million. The bank experienced an annualized return on average assets, or ROA, of -0.47 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.