Safe and Sound

Logan County Bank

Scranton, AR
5
Star Rating
Scranton, AR-based Logan County Bank is an FDIC-insured bank founded in 1926. The bank holds equity of $15.3 million on assets of $83.8 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 14 full-time employees in 2 offices in AR, the bank has amassed loans and leases worth $30.0 million, including real estate loans of $20.8 million. U.S. bank customers currently have $68.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Logan County Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is crucial. It acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is better.

Logan County Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 28 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Logan County Bank's Tier 1 capital ratio was 48.19 percent, above the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Logan County Bank held equity amounting to 18.29 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these kinds of assets suggests a bank may eventually have to use capital to absorb 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 thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Logan County Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.

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, 0.74 percent of Logan County 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 1.01 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Logan County Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Logan County Bank scored 12 out of a possible 30 on Bankrate's test of earnings, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. Logan County Bank's most recent annualized quarterly return on equity was 5.39 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $816,000 on total equity of $15.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.98 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.