Safe and Sound

Cornerstone Bank

Watonga, OK
4
Star Rating
Cornerstone Bank is an FDIC-insured bank founded in 1928 and currently based in Watonga, OK. As of December 31, 2017, the bank held equity of $13.2 million on assets of $193.0 million.

With 45 full-time employees in 3 offices in OK, the bank has amassed loans and leases worth $73.7 million, including real estate loans of $45.9 million. U.S. bank customers currently have $177.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Cornerstone Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is essential. It works as a bulwark against losses and affords protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, the more capital, the better.

Cornerstone Bank fell short of the national average of 13.13 on our test to measure capital adequacy, receiving a score of 4 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. Cornerstone Bank's Tier 1 capital ratio was 15.15 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Cornerstone Bank held equity amounting to 6.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these types of assets suggests a bank may have to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

Cornerstone Bank scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.27 percent of Cornerstone 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Cornerstone Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Banks that are losing money, however, have less ability to do those things.

Cornerstone Bank scored 20 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Cornerstone Bank's most recent annualized quarterly return on equity was 11.17 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.4 million on total equity of $13.2 million. The bank experienced an annualized return on average assets, or ROA, of 0.76 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.