Safe and Sound

Mutual of Omaha Bank

Omaha, NE
4
Star Rating
Started in 1985, Mutual of Omaha Bank is an FDIC-insured bank headquartered in Omaha, NE. The bank holds equity of $862.1 million on $8.14 billion in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $6.44 billion on deposit at 31 offices in multiple states run by 822 full-time employees. With that footprint, the bank holds loans and leases worth $6.29 billion, including $4.70 billion worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Mutual of Omaha Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial resilience. It acts as a cushion against losses and provides protection for depositors during times of financial trouble for the bank. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, Mutual of Omaha Bank received a score of 8 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Mutual of Omaha Bank's Tier 1 capital ratio was 10.94 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, Mutual of Omaha Bank held equity amounting to 10.59 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these types of assets could eventually have to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

Mutual of Omaha Bank finished below the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 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, 1.63 percent of Mutual of Omaha Bank's loans were noncurrent -- in other words, 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 to deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used 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 Mutual of Omaha Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

Mutual of Omaha Bank scored 16 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for Mutual of Omaha Bank was 8.29 percent, above the national average of 8.10 percent.

The bank earned net income of $68.7 million on total equity of $862.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.87 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.