Safe and Sound

American Bank of Oklahoma

Collinsville, OK
4
Star Rating
American Bank of Oklahoma is a Collinsville, OK-based, FDIC-insured bank that opened its doors in 1998. The bank has equity of $25.1 million on assets of $264.2 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $212.2 million on deposit at 6 offices in OK run by 83 full-time employees. With that footprint, the bank holds loans and leases worth $219.5 million, including real estate loans of $119.9 million.

Overall, Bankrate believes that, as of December 31, 2017, American Bank of Oklahoma exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an a bank's financial strength, capital is crucial. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, American Bank of Oklahoma received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. American Bank of Oklahoma's Tier 1 capital ratio was 10.98 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, American Bank of Oklahoma held equity amounting to 9.49 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 effect of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these kinds of assets could eventually have to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the chances of a failure in the future.

American Bank of Oklahoma fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.91 percent of American Bank of Oklahoma's loans were noncurrent, meaning 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on American Bank of Oklahoma's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, American Bank of Oklahoma scored 16 out of a possible 30, exceeding the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. American Bank of Oklahoma's most recent annualized quarterly return on equity was 7.78 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.9 million on total equity of $25.1 million. The bank reported an annualized return on average assets, or ROA, of 0.73 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.