Safe and Sound

Community Neighbor Bank

Camden, AL
5
Star Rating
Camden, AL-based Community Neighbor Bank is an FDIC-insured bank founded in 1906. The bank holds equity of $14.9 million on $109.6 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $94.5 million on deposit at 3 offices in AL run by 36 full-time employees. With that footprint, the bank holds loans and leases worth $59.2 million, including $36.7 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Community Neighbor Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial strength. It works as a bulwark against losses and as protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

Community Neighbor Bank scored above the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 18 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Community Neighbor Bank's Tier 1 capital ratio was 22.15 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, Community Neighbor Bank held equity amounting to 13.56 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 troubled assets, such as past-due mortgages.

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

Community Neighbor Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating 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, 0.47 percent of Community Neighbor 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 maintain 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 troubled assets. Unfortunately, the FDIC did not provide information on Community Neighbor Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Community Neighbor Bank scored 14 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) 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 Neighbor Bank was 6.31 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $959,000 on total equity of $14.9 million. The bank experienced an annualized return on average assets, or ROA, of 0.88 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.