Safe and Sound

Cornerstone National Bank & Trust Company

Palatine, IL
5
Star Rating
Started in 2000, Cornerstone National Bank & Trust Company is an FDIC-insured bank based in Palatine, IL. The bank has equity of $54.9 million on assets of $534.8 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 74 full-time employees in 4 offices in IL, the bank currently holds loans and leases worth $370.3 million, $281.8 million of which are for real estate. U.S. bank customers currently have $472.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Cornerstone National Bank & Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is valuable. It acts as a bulwark against losses and provides protection for accountholders during periods of financial trouble for the bank. From a safety and soundness perspective, more capital is preferred.

Cornerstone National Bank & Trust Company came in below the national average of 13.13 on our test to measure capital adequacy, racking up 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Cornerstone National Bank & Trust Company's Tier 1 capital ratio was 12.35 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Cornerstone National Bank & Trust Company held equity amounting to 10.26 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

Having extensive holdings of these kinds of assets means a bank may eventually have to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a future failure.

Cornerstone National Bank & Trust Company exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.85 percent of Cornerstone National Bank & Trust Company's loans were noncurrent -- in other words, 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 deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Cornerstone National Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Cornerstone National Bank & Trust Company received above-average marks on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. Cornerstone National Bank & Trust Company's most recent annualized quarterly return on equity was 7.75 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $4.5 million on total equity of $54.9 million. The bank reported an annualized return on average assets, or ROA, of 0.85 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.