Safe and Sound

Charter Bank

Corpus Christi, TX
5
Star Rating
Charter Bank is a Corpus Christi, TX-based, FDIC-insured bank started in 1962. The bank has equity of $28.5 million on $256.6 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $219.0 million on deposit at 4 offices in TX run by 55 full-time employees. With that footprint, the bank has amassed loans and leases worth $135.8 million, including $89.8 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Charter Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to score 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 cushion against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a useful measurement of an institution's financial strength. From a safety and soundness perspective, more capital is better.

Charter Bank scored 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Charter Bank's Tier 1 capital ratio was 16.08 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Charter Bank held equity amounting to 11.09 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 problem assets, such as unpaid mortgages.

Having lots of these types of assets could eventually force a bank to use capital to absorb losses, decreasing 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 failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.17 percent of Charter Bank's loans were noncurrent -- in other words, 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 . Comparing the size of that reserve to the total amount of at-risk loans can be a handy 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 long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Charter Bank scored 30 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Charter Bank was 28.61 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $7.8 million on total equity of $28.5 million. The bank experienced an annualized return on average assets, or ROA, of 3.17 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.