Safe and Sound

Commercial State Bank

2
Star Rating
Cedar Bluffs, NE-based Commercial State Bank is an FDIC-insured bank started in 1935. As of December 31, 2017, the bank had equity of $1.5 million on assets of $21.6 million.

Thanks to the work of 3 full-time employees, the bank currently holds loans and leases worth $10.1 million, including $3.5 million worth of real estate loans. U.S. bank customers currently have $19.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Commercial State Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial strength, capital is important. When looking at safety and soundness, the higher the capital, the better.

Commercial State Bank received a score of 4 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Commercial State Bank's Tier 1 capital ratio was 11.59 percent, exceeding 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 challenges.

Overall, Commercial State Bank held equity amounting to 6.94 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these kinds of assets could eventually have to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a failure in the future.

Commercial State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

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, 0.69 percent of Commercial State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below 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 Commercial State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, Commercial State Bank scored 0 out of a possible 30, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Commercial State Bank was -8.81 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $-139,000 on total equity of $1.5 million. The bank experienced an annualized return on average assets, or ROA, of -0.63 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.