Safe and Sound

Bank of Locust Grove

Locust Grove, OK
5
Star Rating
Bank of Locust Grove is a Locust Grove, OK-based, FDIC-insured bank founded in 1949. The bank has equity of $4.3 million on assets of $31.1 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 12 full-time employees in 2 offices in OK, the bank holds loans and leases worth $20.0 million, including real estate loans of $3.2 million. U.S. bank customers currently have $26.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Locust Grove 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 major criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors during times of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial strength, capital is key. When it comes to safety and soundness, the more capital, the better.

Bank of Locust Grove achieved a score of 18 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Bank of Locust Grove's Tier 1 capital ratio was 17.62 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, Bank of Locust Grove held equity amounting to 13.70 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having extensive holdings of these types of assets may eventually require a bank to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

Bank of Locust Grove scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

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, 0.62 percent of Bank of Locust Grove'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 troubled assets . How large that reserve is can be a helpful 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 Bank of Locust Grove's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Bank of Locust Grove outperformed the average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Bank of Locust Grove's most recent annualized quarterly return on equity was 9.54 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $396,000 on total equity of $4.3 million. The bank had an annualized return on average assets, or ROA, of 1.24 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.