Safe and Sound

Bank of Gueydan

Gueydan, LA
5
Star Rating
Started in 1927, Bank of Gueydan is an FDIC-insured bank headquartered in Gueydan, LA. As of December 31, 2017, the bank had equity of $15.5 million on $77.9 million in assets.

With 11 full-time employees, the bank has amassed loans and leases worth $20.0 million, including real estate loans of $7.6 million. U.S. bank customers currently have $61.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Gueydan exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors during times of economic trouble for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is crucial. When looking at safety and soundness, the higher the capital, the better.

Bank of Gueydan scored 30 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Bank of Gueydan's Tier 1 capital ratio was 47.06 percent, higher than the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Bank of Gueydan held equity amounting to 19.94 percent of its assets, which exceeded 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 mortgages.

A bank with a large number of these kinds of assets could eventually be forced to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the chances of a failure in the future.

On Bankrate's test of asset quality, Bank of Gueydan scored 40 out of a possible 40 points, beating out 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, 2.83 percent of Bank of Gueydan'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 size of that reserve to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Bank of Gueydan's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, Bank of Gueydan scored 8 out of a possible 30, below the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The most recent annualized quarterly return on equity for Bank of Gueydan was 3.12 percent, below the national average of 8.10 percent.

The bank recorded net income of $488,000 on total equity of $15.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.61 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.