Safe and Sound

Luana Savings Bank

Luana, IA
5
Star Rating
Luana, IA-based Luana Savings Bank is an FDIC-insured bank founded in 1908. The bank holds equity of $85.5 million on $932,721,000 in assets, according to June 30, 2017, regulatory filings.

With 66 full-time employees in 5 offices in IA, the bank currently holds loans and leases worth $741.9 million, including real estate loans of $670.3 million. U.S. bank customers currently have $822.4 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Luana Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for accountholders during times of financial trouble for the bank. Therefore, a bank's level of capital is a crucial measurement of an institution's financial strength. From a safety and soundness perspective, more capital is better.
Luana Savings Bank fell below the national average of 13.38 on our test to measure capital adequacy, scoring 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Luana Savings Bank's Tier 1 capital ratio was 10.02 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Luana Savings Bank held equity amounting to 9.16 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these types of assets could eventually be required to use capital to absorb losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

Luana Savings Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.62.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.26 percent of Luana Savings 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 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Luana Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Luana Savings Bank scored 30 out of a possible 30, better than the national average of 16.52.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Luana Savings Bank was 24.19 percent, above the national average of 9.28 percent.

The bank recorded net income of $9.8 million on total equity of $85.5 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 2.14 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.