Safe and Sound

Community State Bank of Southwestern Indiana

Poseyville, IN
4
Star Rating
Started in 1925, Community State Bank of Southwestern Indiana is an FDIC-insured bank headquartered in Poseyville, IN. The bank holds equity of $7.4 million on $80.9 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $72.3 million on deposit at 6 offices in IN run by 24 full-time employees. With that footprint, the bank holds loans and leases worth $59.4 million, $46.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Community State Bank of Southwestern Indiana 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 key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is crucial. It works as a bulwark against losses and provides protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Community State Bank of Southwestern Indiana received a score of 8 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Community State Bank of Southwestern Indiana's Tier 1 capital ratio was 12.88 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, Community State Bank of Southwestern Indiana held equity amounting to 9.13 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 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 could eventually require a bank to use capital to absorb losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and elevating the chances of a failure in the future.

Community State Bank of Southwestern Indiana exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Community State Bank of Southwestern Indiana'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 problem assets . Comparing the reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Community State Bank of Southwestern Indiana's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's test of earnings, Community State Bank of Southwestern Indiana scored 20 out of a possible 30, better than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Community State Bank of Southwestern Indiana was 10.43 percent, above the national average of 8.10 percent.

The bank earned net income of $757,000 on total equity of $7.4 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.94 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.