Safe and Sound

Cottonport Bank

Cottonport, LA
4
Star Rating
Cottonport, LA-based Cottonport Bank is an FDIC-insured bank founded in 1902. The bank holds equity of $39.7 million on $332.5 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $292.5 million on deposit at 13 offices in LA run by 145 full-time employees. With that footprint, the bank has amassed loans and leases worth $206.2 million, including $170.7 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Cottonport Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to score American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an an institution's financial stability, capital is key. When looking at safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Cottonport Bank achieved a score of 14 out of a possible 30 points, beating the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Cottonport Bank's Tier 1 capital ratio was 19.22 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, Cottonport Bank held equity amounting to 11.93 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 loan loss reserves and overall capitalization.

A bank with a large number of these kinds of assets could eventually have to use capital to absorb losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

Cottonport Bank finished below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.38 percent of Cottonport 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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Cottonport Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, Cottonport Bank scored 14 out of a possible 30, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Cottonport Bank's most recent annualized quarterly return on equity was 6.80 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.6 million on total equity of $39.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.79 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.