Safe and Sound

COMMUNITY STATE BANK

3
Star Rating
Bradley, AR-based COMMUNITY STATE BANK is an FDIC-insured bank founded in 1933. The bank has equity of $2.6 million on $15.2 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $12.6 million on deposit at 2 offices in AR run by 6 full-time employees. With that footprint, the bank holds loans and leases worth $7.2 million, $4.2 million of which are for real estate.

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. Keep reading for a look at how the bank did on the three important criteria Bankrate used to score U.S. 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 acts as a cushion against losses and as protection for accountholders when a bank is experiencing economic instability. From a safety and soundness perspective, more capital is preferred.

On our test to measure the adequacy of a bank's capital, COMMUNITY STATE BANK scored 18 out of a possible 30 points, beating out the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. COMMUNITY STATE BANK's Tier 1 capital ratio was 26.98 percent, above the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, COMMUNITY STATE BANK held equity amounting to 17.05 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these kinds of assets may eventually have to use capital to cover losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a future failure.

COMMUNITY STATE BANK scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 3.51 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 troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem 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 profitability affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to address 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 test of earnings, COMMUNITY STATE BANK scored 0 out of a possible 30, less than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for COMMUNITY STATE BANK was -0.58 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $-15,000 on total equity of $2.6 million. The bank reported an annualized return on average assets, or ROA, of -0.10 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.