Safe and Sound

Advantage Bank

Oklahoma City, OK
3
Star Rating
Advantage Bank is an FDIC-insured bank started in 1913 and currently based in Oklahoma City, OK. The bank has equity of $7.7 million on $61.0 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $53.3 million on deposit at 2 offices in OK run by 28 full-time employees. With that footprint, the bank currently holds loans and leases worth $36.4 million, including $32.3 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Advantage Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a key measurement of an institution's financial strength. From a safety and soundness perspective, the higher the capital, the better.

Advantage Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 16 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Advantage Bank's Tier 1 capital ratio was 15.55 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 stand up to economic headwinds.

Overall, Advantage Bank held equity amounting to 12.56 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand 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 mortgages.

A bank with large numbers of these kinds of assets may eventually be forced to use capital to cover losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Advantage Bank scored 28 out of a possible 40 points, falling short of 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, 3.73 percent of Advantage 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 known as an "allowance for loan and lease losses" to deal with problem assets . 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 problem loans. Unfortunately, the FDIC did not provide information on Advantage Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, likely making the bank better prepared to withstand financial trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Advantage Bank scored 10 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Advantage Bank's most recent annualized quarterly return on equity was 4.82 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $370,000 on total equity of $7.7 million. The bank had an annualized return on average assets, or ROA, of 0.61 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.