Safe and Sound

Classic Bank, National Association

Cameron, TX
4
Star Rating
Classic Bank, National Association is a Cameron, TX-based, FDIC-insured bank that opened its doors in 1889. The bank has equity of $31.1 million on assets of $350.4 million, according to December 31, 2017, regulatory filings.

With 82 full-time employees in 6 offices in TX, the bank currently holds loans and leases worth $227.4 million, including real estate loans of $153.9 million. U.S. bank customers currently have $304.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Classic Bank, National Association exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is an important measurement of a bank's financial strength. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Classic Bank, National Association received a score of 8 out of a possible 30 points, failing to reach the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Classic Bank, National Association's Tier 1 capital ratio was 13.17 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Classic Bank, National Association held equity amounting to 8.88 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these kinds of assets may eventually require a bank to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the chances of a future failure.

Classic Bank, National Association scored 32 out of a possible 40 points on Bankrate's asset quality test, falling short of the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.62 percent of Classic Bank, National Association'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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used 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 Classic Bank, National Association's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may 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 financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, Classic Bank, National Association scored 20 out of a possible 30, exceeding the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Classic Bank, National Association was 11.85 percent, above the national average of 8.10 percent.

The bank recorded net income of $3.5 million on total equity of $31.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.07 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.