Safe and Sound

The Capital Bank

Little Rock, AR
2
Star Rating
The Capital Bank is a Little Rock, AR-based, FDIC-insured bank that opened its doors in 1997. The bank holds equity of $13.6 million on $149.0 million in assets, according to December 31, 2017, regulatory filings.

With 12 full-time employees, the bank has amassed loans and leases worth $59.2 million, including real estate loans of $35.5 million. U.S. bank customers currently have $94.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Capital Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial fortitude, capital is essential. When it comes to safety and soundness, more capital is better.

The Capital Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The Capital Bank's Tier 1 capital ratio was 15.59 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, The Capital Bank held equity amounting to 9.15 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

A bank with a large number of these kinds of assets could eventually be forced to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the chances of a failure in the future.

On Bankrate's test of asset quality, The Capital Bank scored 36 out of a possible 40 points, coming in below the national average of 37.49 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, 1.21 percent of The Capital Bank's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The Capital Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand economic shocks. Losses, on the other hand, reduce a bank's ability to do those things.

The Capital Bank scored 0 out of a possible 30 on Bankrate's earnings test, falling short of 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. The Capital Bank's most recent annualized quarterly return on equity was -3.33 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $-491,000 on total equity of $13.6 million. The bank experienced an annualized return on average assets, or ROA, of -0.33 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.