Safe and Sound

The James Polk Stone Community Bank

Portales, NM
5
Star Rating
The James Polk Stone Community Bank is a Portales, NM-based, FDIC-insured bank founded in 1906. The bank holds equity of $24.8 million on assets of $233.7 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $197.8 million on deposit at 8 offices in NM run by 64 full-time employees. With that footprint, the bank has amassed loans and leases worth $104.0 million, $83.2 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, The James Polk Stone Community Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important 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

Capital works as a buffer against losses and as protection for depositors when a bank is experiencing financial trouble. It follows then that a bank's level of capital is an essential measurement of an institution's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, The James Polk Stone Community Bank received a score of 12 out of a possible 30 points, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. The James Polk Stone Community Bank's Tier 1 capital ratio was 19.67 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, The James Polk Stone Community Bank held equity amounting to 10.60 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets could eventually be forced to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the risk of a failure in the future.

On Bankrate's test of asset quality, The James Polk Stone Community 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 useful indicator of asset quality.As of December 31, 2017, 1.88 percent of The James Polk Stone Community Bank'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 troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The James Polk Stone Community Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

The James Polk Stone Community Bank exceeded the national average on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for The James Polk Stone Community Bank was 14.19 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.4 million on total equity of $24.8 million. The bank had an annualized return on average assets, or ROA, of 1.52 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.