Safe and Sound

Logan State Bank

Logan, IA
4
Star Rating
Logan State Bank is a Logan, IA-based, FDIC-insured bank started in 1888. The bank has equity of $4.2 million on assets of $48.2 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 11 full-time employees in 2 offices in IA, the bank currently holds loans and leases worth $42.2 million, $25.8 million of which are for real estate. The bank currently holds $42.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Logan State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors during periods of financial instability for the bank. It follows then that a bank's level of capital is an essential measurement of an institution's financial fortitude. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Logan State Bank received a score of 8 out of a possible 30 points, falling short of the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Logan State Bank's Tier 1 capital ratio was 10.75 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Logan State Bank held equity amounting to 8.62 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due loans.

Having lots of these types of assets could eventually require a bank to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

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

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, none of Logan State Bank's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is 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 State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. However, banks that are losing money are less able to do those things.

Logan State Bank outperformed the average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Logan State Bank was 7.26 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $299,000 on total equity of $4.2 million. The bank had an annualized return on average assets, or ROA, of 0.66 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.