Safe and Sound

Community Bank of Oelwein

Oelwein, IA
4
Star Rating
Community Bank of Oelwein is an Oelwein, IA-based, FDIC-insured bank that opened its doors in 1998. Regulatory filings show the bank having equity of $11.5 million on $108.1 million in assets, as of December 31, 2017.

Thanks to the work of 11 full-time employees, the bank holds loans and leases worth $47.7 million, including real estate loans of $29.4 million. U.S. bank customers currently have $94.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Community Bank of Oelwein exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is important. It works as a bulwark against losses and as protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Community Bank of Oelwein received a score of 12 out of a possible 30 points, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Community Bank of Oelwein's Tier 1 capital ratio was 20.72 percent, exceeding 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 stand up to financial challenges.

Overall, Community Bank of Oelwein held equity amounting to 10.65 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

Having a large number of these types of assets means a bank may eventually have to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and increasing the risk of a future failure.

Community Bank of Oelwein exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, none of Community Bank of Oelwein'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size 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. Community Bank of Oelwein's loan loss allowance was 27,350.00 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, expanding its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand economic trouble. Conversely, losses take away from a bank's ability to do those things.

Community Bank of Oelwein scored 14 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Community Bank of Oelwein was 6.88 percent, below the national average of 8.10 percent.

The bank earned net income of $761,000 on total equity of $11.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.68 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.