Safe and Sound

The State Exchange Bank

Lamont, OK
5
Star Rating
Started in 1901, The State Exchange Bank is an FDIC-insured bank headquartered in Lamont, OK. Regulatory filings show the bank having equity of $7.4 million on assets of $64.5 million, as of December 31, 2017.

Thanks to the efforts of 12 full-time employees, the bank currently holds loans and leases worth $54.6 million, including real estate loans of $25.8 million. The bank currently holds $54.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The State Exchange Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is essential. It works as a cushion against losses and as protection for accountholders during times of economic instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

The State Exchange Bank achieved a score of 14 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. The State Exchange Bank's Tier 1 capital ratio was 12.63 percent, higher than the 6 percent level considered adequate by regulators, but less 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, The State Exchange Bank held equity amounting to 11.50 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to absorb losses, decreasing 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 money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, The State Exchange Bank scored 32 out of a possible 40 points, failing to reach the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 4.68 percent of The State Exchange 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The State Exchange Bank'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, boosting its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

The State Exchange Bank scored 28 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The State Exchange Bank's most recent annualized quarterly return on equity was 19.93 percent, above the national average of 8.10 percent.

The bank reported net income of $1.4 million on total equity of $7.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 2.27 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.