Safe and Sound

Community State Bank

Paton, IA
5
Star Rating
Community State Bank is an FDIC-insured bank founded in 1956 and currently based in Paton, IA. Regulatory filings show the bank having equity of $8.0 million on assets of $43.5 million, as of December 31, 2017.

With 5 full-time employees, the bank currently holds loans and leases worth $15.5 million, including real estate loans of $3.6 million. U.S. bank customers currently have $35.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Community State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors during periods of economic instability for the bank. Therefore, when it comes to measuring an a bank's financial fortitude, capital is crucial. From a safety and soundness perspective, the more capital, the better.

Community State Bank scored above the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 28 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Community State Bank's Tier 1 capital ratio was 33.74 percent, above the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Community State Bank held equity amounting to 18.40 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 mortgages, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these kinds of assets could eventually force a bank to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and elevating the chances of a future failure.

On Bankrate's asset quality test, Community State Bank scored 40 out of a possible 40 points, above the national average of 37.49 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, 0.11 percent of Community State Bank's loans were noncurrent, meaning 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 to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful 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 can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank better prepared to withstand financial shocks. Losses, on the other hand, take away from a bank's ability to do those things.

Community State Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Community State Bank was 5.29 percent, below the national average of 8.10 percent.

The bank earned net income of $419,000 on total equity of $8.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.98 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.