Safe and Sound

CoastalStates Bank

1
Star Rating
CoastalStates Bank is an FDIC-insured bank started in 2004 and currently based in Hilton Head Isla, SC. As of December 31, 2017, the bank held equity of $50.9 million on assets of $530.9 million.

U.S. bank customers have $372.8 million on deposit at 5 offices in SC run by 97 full-time employees. With that footprint, the bank currently holds loans and leases worth $298.2 million, including real estate loans of $171.8 million.

Overall, Bankrate believes that, as of December 31, 2017, CoastalStates Bank exhibited a significantly below-average condition, earning 1 out of 5 stars for safety and soundness. Here's an analysis 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

When it comes to measuring an an institution's financial fortitude, capital is key. It acts as a bulwark against losses and provides protection for accountholders during periods of economic instability for the bank. When looking at safety and soundness, the higher the capital, the better.

CoastalStates Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, below the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. CoastalStates Bank's Tier 1 capital ratio was 13.38 percent, above 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 weather economic downturns.

Overall, CoastalStates Bank held equity amounting to 9.59 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

Having a large number of these kinds of assets may eventually require a bank to use capital to cover losses, shrinking 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 money, resulting in lower earnings and potentially more risk of a future failure.

CoastalStates Bank scored 32 out of a possible 40 points on Bankrate's asset quality test, failing to reach the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.51 percent of CoastalStates 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . 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 CoastalStates Bank'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, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. CoastalStates Bank's most recent annualized quarterly return on equity was -26.31 percent, below the national average of 8.10 percent.

The bank recorded net income of $-11.2 million on total equity of $50.9 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of -2.31 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.