Safe and Sound

The Bank of Magnolia Company

Magnolia, OH
4
Star Rating
The Bank of Magnolia Company is a Magnolia, OH-based, FDIC-insured bank founded in 1899. Regulatory filings show the bank having equity of $9.4 million on assets of $77.3 million, as of December 31, 2017.

U.S. bank customers have $67.1 million on deposit at 3 offices in OH run by 20 full-time employees. With that footprint, the bank has amassed loans and leases worth $33.3 million, including $27.1 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, The Bank of Magnolia Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors during times of financial trouble for the bank. It follows then that when it comes to measuring an a bank's financial resilience, capital is key. When looking at safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, The Bank of Magnolia Company scored 16 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The Bank of Magnolia Company's Tier 1 capital ratio was 21.91 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, The Bank of Magnolia Company held equity amounting to 12.15 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

Having extensive holdings of these types of assets means a bank could eventually have to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

The Bank of Magnolia Company beat out 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 widely used indicator of asset quality.As of December 31, 2017, 1.36 percent of The Bank of Magnolia Company'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Bank of Magnolia Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, The Bank of Magnolia Company scored 8 out of a possible 30, falling short of the national average of 15.12.

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 The Bank of Magnolia Company was 3.31 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $310,000 on total equity of $9.4 million. The bank reported an annualized return on average assets, or ROA, of 0.38 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.