Safe and Sound

Bank of Laverne

Laverne, OK
4
Star Rating
Founded in 1922, Bank of Laverne is an FDIC-insured bank based in Laverne, OK. The bank holds equity of $9.3 million on $59.4 million in assets, according to December 31, 2017, regulatory filings.

With 16 full-time employees, the bank holds loans and leases worth $28.8 million, including real estate loans of $3.7 million. U.S. bank customers currently have $50.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Laverne 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 key criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is experiencing economic instability. Therefore, when it comes to measuring an a bank's financial stability, capital is useful. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Bank of Laverne achieved a score of 22 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Bank of Laverne's Tier 1 capital ratio was 24.54 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, Bank of Laverne held equity amounting to 15.62 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these kinds of assets suggests a bank could have to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Bank of Laverne scored 36 out of a possible 40 points, less than the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.97 percent of Bank of Laverne'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 . Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bank of Laverne'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, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand financial trouble. However, banks that are losing money are less able to do those things.

Bank of Laverne scored 8 out of a possible 30 on Bankrate's test of earnings, coming in below the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Bank of Laverne's most recent annualized quarterly return on equity was 3.88 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $368,000 on total equity of $9.3 million. The bank reported an annualized return on average assets, or ROA, of 0.63 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.