Safe and Sound

Oak Bank

Fitchburg, WI
4
Star Rating
Founded in 2000, Oak Bank is an FDIC-insured bank headquartered in Fitchburg, WI. As of December 31, 2017, the bank held equity of $30.2 million on assets of $299.1 million.

With 32 full-time employees, the bank currently holds loans and leases worth $237.4 million, including real estate loans of $197.5 million. U.S. bank customers currently have $235.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Oak Bank 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 major criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

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

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

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Oak Bank's Tier 1 capital ratio was 11.60 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Oak Bank held equity amounting to 10.10 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 problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having lots of these kinds of assets suggests a bank may have to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, Oak Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.02 percent of Oak Bank'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 . Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Oak Bank's loan loss allowance was 11,989.19 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, potentially making the bank better prepared to withstand financial trouble. Obviously, banks that are losing money have less ability to do those things.

Oak Bank exceeded the national average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

One widely used way to measure 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 Oak Bank was 7.86 percent, below the national average of 8.10 percent.

The bank reported net income of $2.4 million on total equity of $30.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.85 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.