Safe and Sound

Community National Bank

Midland, TX
4
Star Rating
Midland, TX-based Community National Bank is an FDIC-insured bank started in 1984. The bank has equity of $124.4 million on $1.21 billion in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 195 full-time employees in 11 offices in TX, the bank holds loans and leases worth $783.6 million, including $397.5 million worth of real estate loans. The bank currently holds $1.08 billion 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 a breakdown of how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for depositors during times of financial instability for the bank. Therefore, a bank's level of capital is a key measurement of an institution's financial strength. When looking at safety and soundness, the more capital, the better.

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

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Community National Bank's Tier 1 capital ratio was 12.20 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, Community National Bank held equity amounting to 10.27 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine 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.

Having extensive holdings of these types of assets could eventually force 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 interest for the bank, pushing down earnings and elevating the risk of a future failure.

Community National Bank fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

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, 1.83 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 above the national average of 1.01 percent.

Banks keep 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 problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. 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 safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

Community National Bank exceeded the national average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Community National Bank was 10.84 percent, above the national average of 8.10 percent.

The bank earned net income of $12.9 million on total equity of $124.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.17 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.