Safe and Sound

Louisa Community Bank

1
Star Rating
Started in 2006, Louisa Community Bank is an FDIC-insured bank based in Louisa, KY. As of December 31, 2017, the bank held equity of $3.9 million on $37.2 million in assets.

Thanks to the efforts of 15 full-time employees, the bank holds loans and leases worth $32.4 million, including real estate loans of $26.3 million. The bank currently holds $30.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Louisa Community Bank exhibited a significantly below-average condition, earning 1 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 evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial strength. It works as a cushion against losses and as protection for depositors during periods of financial instability for the bank. From a safety and soundness perspective, the higher the capital, the better.

Louisa Community Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Louisa Community Bank's Tier 1 capital ratio was 10.64 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, Louisa Community Bank held equity amounting to 10.53 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 mortgages.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the chances of a future failure.

Louisa Community Bank scored below the national average of 37.49 on Bankrate's asset quality test, racking up 12 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 7.65 percent of Louisa Community Bank's loans were noncurrent, meaning 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." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Louisa Community 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, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses lessen a bank's ability to do those things.

Louisa Community Bank underperformed the average on Bankrate's earnings test, achieving a score of 0 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. Louisa Community Bank's most recent annualized quarterly return on equity was -18.02 percent, below the national average of 8.10 percent.

The bank recorded net income of $-775,000 on total equity of $3.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of -2.09 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.