Safe and Sound

Bank of O'Fallon

O'fallon, IL
5
Star Rating
Founded in 1960, Bank of O'Fallon is an FDIC-insured bank headquartered in O'fallon, IL. The bank holds equity of $41.6 million on assets of $302.7 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 29 full-time employees in 2 offices in IL, the bank holds loans and leases worth $217.8 million, including $192.9 million worth of real estate loans. The bank currently holds $260.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Bank of O'Fallon exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders when a bank is experiencing economic trouble. Therefore, when it comes to measuring an a bank's financial stability, capital is crucial. When it comes to safety and soundness, more capital is preferred.

Bank of O'Fallon scored above the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 18 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Bank of O'Fallon's Tier 1 capital ratio was 23.96 percent, exceeding 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 weather financial challenges.

Overall, Bank of O'Fallon held equity amounting to 13.75 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these types of assets could eventually be required to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be 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 O'Fallon did better than 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 useful indicator of asset quality.As of December 31, 2017, 0.29 percent of Bank of O'Fallon's loans were noncurrent -- in other words, 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 to deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of O'Fallon's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic shocks. Conversely, losses diminish a bank's ability to do those things.

Bank of O'Fallon exceeded the national 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, or net income (profit, essentially) divided by total equity. Bank of O'Fallon's most recent annualized quarterly return on equity was 8.79 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.6 million on total equity of $41.6 million. The bank had an annualized return on average assets, or ROA, of 1.20 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.