Safe and Sound

Community National Bank

Dayton, TN
4
Star Rating
Founded in 1964, Community National Bank is an FDIC-insured bank based in Dayton, TN. As of December 31, 2017, the bank held equity of $25.6 million on assets of $213.1 million.

Thanks to the work of 58 full-time employees in 6 offices in multiple states, the bank has amassed loans and leases worth $139.1 million, including $120.0 million worth of real estate loans. The bank currently holds $186.6 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. Here's an analysis of how the bank fared on the three key criteria Bankrate used to score U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for account holders when a bank is experiencing economic instability. Therefore, a bank's level of capital is a valuable measurement of a bank's financial resilience. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Community National Bank achieved a score of 16 out of a possible 30 points, above 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 17.87 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

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

Asset Quality Score

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

A bank with lots of these kinds of assets may eventually be required to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

Community National Bank scored 32 out of a possible 40 points on Bankrate's asset quality test, below 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, 2.67 percent of Community National Bank's loans were noncurrent, meaning 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 . How large that reserve is 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 National Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is 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, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important measure of a bank's earnings. Community National Bank's most recent annualized quarterly return on equity was 9.21 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.3 million on total equity of $25.6 million. The bank had an annualized return on average assets, or ROA, of 1.09 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.