Safe and Sound

Community State Bank

Hennessey, OK
3
Star Rating
Hennessey, OK-based Community State Bank is an FDIC-insured bank founded in 1988. As of December 31, 2017, the bank held equity of $4.2 million on $60.8 million in assets.

With 19 full-time employees in 3 offices in OK, the bank currently holds loans and leases worth $21.9 million, including real estate loans of $8.6 million. U.S. bank customers currently have $56.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Community State Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is a valuable measurement of a bank's financial fortitude. When it comes to safety and soundness, the more capital, the better.

Community State Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 4 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Community State Bank's Tier 1 capital ratio was 15.51 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Community State Bank held equity amounting to 6.86 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

Having large numbers of these types of assets suggests a bank may have 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 money, resulting in diminished earnings and potentially more risk of a future failure.

Community State Bank fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 28 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 4.02 percent of Community State 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 to deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Community State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance 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 prepared to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, Community State Bank scored 22 out of a possible 30, 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 important way to measure a bank's earnings. Community State Bank's most recent annualized quarterly return on equity was 12.82 percent, above the national average of 8.10 percent.

The bank earned net income of $527,000 on total equity of $4.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.91 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.