Safe and Sound

Community State Bank

Brook, IN
4
Star Rating
Brook, IN-based Community State Bank is an FDIC-insured bank started in 1931. As of December 31, 2017, the bank held equity of $7.4 million on assets of $61.1 million.

With 9 full-time employees, the bank currently holds loans and leases worth $44.2 million, including real estate loans of $34.1 million. U.S. bank customers currently have $52.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Community State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an important measurement of an institution's financial resilience. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Community State Bank achieved a score of 16 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Community State Bank's Tier 1 capital ratio was 17.33 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, Community State Bank held equity amounting to 12.18 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, decreasing its buffer 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 came in below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

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, 1.59 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 handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. 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 affects its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Community State Bank scored 16 out of a possible 30, exceeding the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Community State Bank's most recent annualized quarterly return on equity was 7.95 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $578,000 on total equity of $7.4 million. The bank had an annualized return on average assets, or ROA, of 0.96 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.