Safe and Sound

BankOrion

Orion, IL
5
Star Rating
Orion, IL-based BankOrion is an FDIC-insured bank founded in 1890. As of December 31, 2017, the bank had equity of $50.6 million on $441.8 million in assets.

Thanks to the work of 94 full-time employees in 9 offices in multiple states, the bank currently holds loans and leases worth $259.5 million, including real estate loans of $196.0 million. The bank currently holds $368.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, BankOrion exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial strength. It works as a buffer against losses and as protection for depositors during times of economic instability for the bank. When looking at safety and soundness, more capital is better.

BankOrion finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 12 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. BankOrion's Tier 1 capital ratio was 16.47 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, BankOrion held equity amounting to 11.46 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these kinds of assets could eventually have to use capital to cover losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, decreasing earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, BankOrion scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.69 percent of BankOrion'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on BankOrion's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand financial shocks. However, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, BankOrion scored 18 out of a possible 30, beating out the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for BankOrion was 8.38 percent, above the national average of 8.10 percent.

The bank reported net income of $4.1 million on total equity of $50.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.94 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.