Safe and Sound

Community Bank of Trenton

Trenton, IL
4
Star Rating
Started in 1963, Community Bank of Trenton is an FDIC-insured bank based in Trenton, IL. The bank has equity of $9.6 million on assets of $82.8 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 15 full-time employees, the bank currently holds loans and leases worth $58.3 million, $49.1 million of which are for real estate. U.S. bank customers currently have $66.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Community Bank of Trenton exhibited a good condition, earning 4 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 American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial resilience, capital is crucial. When looking at safety and soundness, the more capital, the better.

Community Bank of Trenton 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.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Community Bank of Trenton's Tier 1 capital ratio was 17.13 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 weather economic headwinds.

Overall, Community Bank of Trenton held equity amounting to 11.54 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 effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these types of assets could eventually be forced to use capital to absorb losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

Community Bank of Trenton scored 32 out of a possible 40 points on Bankrate's test of asset quality, below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 2.61 percent of Community Bank of Trenton'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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Community Bank of Trenton's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Community Bank of Trenton scored 14 out of a possible 30, less than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Community Bank of Trenton's most recent annualized quarterly return on equity was 6.64 percent, below the national average of 8.10 percent.

The bank reported net income of $624,000 on total equity of $9.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.78 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.