Safe and Sound

CornerstoneBank

Atlanta, GA
2
Star Rating
Atlanta, GA-based CornerstoneBank is an FDIC-insured bank started in 2001. As of December 31, 2017, the bank had equity of $20.8 million on $267.7 million in assets.

Thanks to the work of 44 full-time employees in 3 offices in GA, the bank holds loans and leases worth $171.4 million, $147.7 million of which are for real estate. U.S. bank customers currently have $242.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, CornerstoneBank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is experiencing financial instability. It follows then that a bank's level of capital is a valuable measurement of an institution's financial fortitude. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, CornerstoneBank received a score of 6 out of a possible 30 points, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. CornerstoneBank's Tier 1 capital ratio was 13.42 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, CornerstoneBank held equity amounting to 7.78 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having lots of these types of assets could eventually require a bank to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, CornerstoneBank scored 28 out of a possible 40 points, failing to reach the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 3.13 percent of CornerstoneBank'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 problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on CornerstoneBank'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, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

CornerstoneBank scored 10 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. CornerstoneBank's most recent annualized quarterly return on equity was 6.07 percent, below the national average of 8.10 percent.

The bank earned net income of $963,000 on total equity of $20.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.38 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.