Safe and Sound

Community National Bank

Derby, VT
4
Star Rating
Founded in 1851, Community National Bank is an FDIC-insured bank based in Derby, VT. As of December 31, 2017, the bank had equity of $70.2 million on $666.4 million in assets.

Thanks to the work of 131 full-time employees in 12 offices in VT, the bank currently holds loans and leases worth $498.8 million, including real estate loans of $421.8 million. The bank currently holds $561.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Community National Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial strength. It works as a cushion against losses and affords protection for depositors during times of financial trouble for the bank. From a safety and soundness perspective, the more capital, the better.

Community National Bank fell below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 8 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Community National Bank's Tier 1 capital ratio was 12.64 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, Community National Bank held equity amounting to 10.54 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these kinds of assets means a bank could have to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and elevating the risk of a failure in the future.

Community National Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.49.

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, 0.86 percent of Community National Bank's loans were noncurrent -- in other words, 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful 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 National Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Community National Bank scored 18 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Community National Bank was 9.93 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $6.8 million on total equity of $70.2 million. The bank had an annualized return on average assets, or ROA, of 1.04 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.