Safe and Sound

Bank of Montgomery

Montgomery, LA
5
Star Rating
Founded in 1903, Bank of Montgomery is an FDIC-insured bank based in Montgomery, LA. The bank holds equity of $37.6 million on assets of $382.1 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 117 full-time employees in 13 offices in LA, the bank has amassed loans and leases worth $310.5 million, $260.3 million of which are for real estate. U.S. bank customers currently have $343.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Montgomery 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 major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial strength. It works as a cushion against losses and provides protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

Bank of Montgomery received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Bank of Montgomery's Tier 1 capital ratio was 12.20 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, Bank of Montgomery held equity amounting to 9.85 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with large numbers of these types of assets may eventually be forced to use capital to cover losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and elevating the risk of a future failure.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.02 percent of Bank of Montgomery'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 deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Bank of Montgomery's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, Bank of Montgomery scored 26 out of a possible 30, beating 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 total equity. The most recent annualized quarterly return on equity for Bank of Montgomery was 17.36 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $6.0 million on total equity of $37.6 million. The bank reported an annualized return on average assets, or ROA, of 1.78 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.