Safe and Sound

Bank of Louisiana

Louisiana, MO
5
Star Rating
Bank of Louisiana is a Louisiana, MO-based, FDIC-insured bank founded in 1887. The bank has equity of $5.8 million on $52.7 million in assets, according to December 31, 2017, regulatory filings.

With 16 full-time employees in 2 offices in MO, the bank has amassed loans and leases worth $33.4 million, including real estate loans of $27.3 million. U.S. bank customers currently have $44.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Louisiana exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders during periods of financial instability for the bank. Therefore, a bank's level of capital is a crucial measurement of a bank's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

Bank of Louisiana fell below the national average of 13.13 on our test to measure capital adequacy, racking up 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Bank of Louisiana's Tier 1 capital ratio was 14.56 percent, exceeding 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 weather financial difficulties.

Overall, Bank of Louisiana held equity amounting to 10.97 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 troubled assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets may eventually force a bank to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a future failure.

Bank of Louisiana scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding 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, 0.07 percent of Bank of Louisiana'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 1.01 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Bank of Louisiana's loan loss allowance was 2,943.48 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

Bank of Louisiana did above-average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Bank of Louisiana was 13.45 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $757,000 on total equity of $5.8 million. The bank reported an annualized return on average assets, or ROA, of 1.48 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.