Safe and Sound

The Callaway Bank

Fulton, MO
4
Star Rating
Fulton, MO-based The Callaway Bank is an FDIC-insured bank founded in 1857. The bank holds equity of $33.4 million on $368.0 million in assets, according to December 31, 2017, regulatory filings.

With 62 full-time employees in 8 offices in MO, the bank has amassed loans and leases worth $275.4 million, including real estate loans of $228.1 million. U.S. bank customers currently have $288.0 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders during times of financial instability for the bank. Therefore, a bank's level of capital is a key measurement of an institution's financial fortitude. When looking at safety and soundness, the higher the capital, the better.

The Callaway Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The Callaway Bank's Tier 1 capital ratio was 11.83 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, The Callaway Bank held equity amounting to 9.08 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

A bank with lots of these kinds of assets could eventually be required to use capital to absorb losses, diminishing 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, decreasing earnings and elevating the risk of a future failure.

The Callaway Bank scored 36 out of a possible 40 points on Bankrate's asset quality test, less than the national average of 37.49.

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, 0.40 percent of The Callaway Bank'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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Callaway Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank better able to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

The Callaway Bank did above-average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. The Callaway Bank's most recent annualized quarterly return on equity was 7.34 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.4 million on total equity of $33.4 million. The bank had an annualized return on average assets, or ROA, of 0.66 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.