Safe and Sound

Freedom Bank of Southern Missouri

Cassville, MO
5
Star Rating
Freedom Bank of Southern Missouri is a Cassville, MO-based, FDIC-insured bank started in 1999. As of December 31, 2017, the bank had equity of $25.5 million on $271.0 million in assets.

Thanks to the work of 55 full-time employees in 5 offices in MO, the bank currently holds loans and leases worth $222.1 million, including real estate loans of $171.0 million. U.S. bank customers currently have $226.3 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is key. It acts as a cushion against losses and as protection for depositors 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, Freedom Bank of Southern Missouri received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Freedom Bank of Southern Missouri's Tier 1 capital ratio was 11.84 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Freedom Bank of Southern Missouri held equity amounting to 9.43 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these types of assets could eventually be forced to use capital to cover losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the chances of a future failure.

On Bankrate's test of asset quality, Freedom Bank of Southern Missouri scored 40 out of a possible 40 points, exceeding 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, 0.61 percent of Freedom Bank of Southern Missouri'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 to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Freedom Bank of Southern Missouri's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Freedom Bank of Southern Missouri received above-average marks on Bankrate's test of earnings, achieving a score of 26 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Freedom Bank of Southern Missouri was 17.49 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $4.4 million on total equity of $25.5 million. The bank reported an annualized return on average assets, or ROA, of 1.65 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.