Safe and Sound

Bank of Cherokee County

Hulbert, OK
4
Star Rating
Bank of Cherokee County is an FDIC-insured bank founded in 1908 and currently headquartered in Hulbert, OK. The bank holds equity of $9.3 million on $103.5 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $93.9 million on deposit at 3 offices in OK run by 41 full-time employees. With that footprint, the bank holds loans and leases worth $68.0 million, $54.3 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Cherokee County exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial stability, capital is essential. From a safety and soundness perspective, the more capital, the better.

Bank of Cherokee County came in below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of Cherokee County's Tier 1 capital ratio was 14.34 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, Bank of Cherokee County held equity amounting to 9.01 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 unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these types of assets suggests a bank may have to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a future failure.

Bank of Cherokee County beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.53 percent of Bank of Cherokee County'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bank of Cherokee County's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Bank of Cherokee County scored 12 out of a possible 30 on Bankrate's test of earnings, below the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. Bank of Cherokee County's most recent annualized quarterly return on equity was 5.64 percent, below the national average of 8.10 percent.

The bank earned net income of $514,000 on total equity of $9.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.50 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.