Safe and Sound

Community Bank

Dunlap, IA
3
Star Rating
Community Bank is an FDIC-insured bank started in 1926 and currently based in Dunlap, IA. The bank holds equity of $11.8 million on assets of $93.6 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $76.6 million on deposit at 7 offices in IA run by 29 full-time employees. With that footprint, the bank holds loans and leases worth $68.0 million, $41.1 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Community Bank exhibited a generally satisfactory condition, earning 3 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 evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial strength, capital is crucial. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, Community Bank racked up 14 out of a possible 30 points, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Community Bank's Tier 1 capital ratio was 14.22 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Community Bank held equity amounting to 12.62 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

Having a large number of these kinds of assets may eventually force a bank to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.60 percent of Community 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 to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Community Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

Community Bank scored 8 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Community Bank's most recent annualized quarterly return on equity was 3.31 percent, below the national average of 8.10 percent.

The bank reported net income of $391,000 on total equity of $11.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.43 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.