Safe and Sound

O'Bannon Banking Company

Buffalo, MO
4
Star Rating
O'Bannon Banking Company is a Buffalo, MO-based, FDIC-insured bank dating back to 1905. As of December 31, 2017, the bank had equity of $17.3 million on assets of $197.8 million.

Thanks to the work of 59 full-time employees in 5 offices in MO, the bank currently holds loans and leases worth $159.8 million, $131.4 million of which are for real estate. U.S. bank customers currently have $171.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, O'Bannon Banking Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an a bank's financial stability, capital is valuable. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, O'Bannon Banking Company received a score of 8 out of a possible 30 points, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. O'Bannon Banking Company's Tier 1 capital ratio was 10.79 percent, above the 6 percent level regulators consider adequate, but less than 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, O'Bannon Banking Company held equity amounting to 8.74 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 loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

Having lots of these types of assets could eventually require a bank to use capital to cover losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a future failure.

O'Bannon Banking Company came in below the national average of 37.49 on Bankrate's asset quality test, racking up 36 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, 0.94 percent of O'Bannon Banking Company's loans were noncurrent, meaning 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 deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on O'Bannon Banking Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's earnings test, O'Bannon Banking Company scored 16 out of a possible 30, beating the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for O'Bannon Banking Company was 8.17 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.4 million on total equity of $17.3 million. The bank reported an annualized return on average assets, or ROA, of 0.73 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.