Safe and Sound

Cleo State Bank

Cleo Springs, OK
4
Star Rating
Cleo State Bank is a Cleo Springs, OK-based, FDIC-insured bank dating back to 1900. Regulatory filings show the bank having equity of $14.6 million on assets of $88.8 million, as of December 31, 2017.

Thanks to the work of 16 full-time employees in 4 offices in OK, the bank has amassed loans and leases worth $32.4 million, $1.4 million of which are for real estate. The bank currently holds $72.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Cleo State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors during periods of economic instability for the bank. Therefore, when it comes to measuring an a bank's financial stability, capital is key. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Cleo State Bank achieved a score of 24 out of a possible 30 points, exceeding the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Cleo State Bank's Tier 1 capital ratio was 16.79 percent, exceeding 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 weather economic downturns.

Overall, Cleo State Bank held equity amounting to 16.41 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these types of assets means a bank may eventually have to use capital to absorb losses, diminishing its buffer of equity. 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 reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Cleo State Bank scored 32 out of a possible 40 points, failing to reach the national average of 37.49 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, 9.02 percent of Cleo State Bank's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve 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 Cleo State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

Cleo State Bank fell short of the national average on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Cleo State Bank was 1.85 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $282,000 on total equity of $14.6 million. The bank reported an annualized return on average assets, or ROA, of 0.31 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.