Safe and Sound

Scottsburg Building and Loan Association

Scottsburg, IN
4
Star Rating
Scottsburg Building and Loan Association is a Scottsburg, IN-based, FDIC-insured bank started in 1889. The bank has equity of $12.5 million on $92.0 million in assets, according to December 31, 2017, regulatory filings.

With 10 full-time employees, the bank holds loans and leases worth $46.4 million, including real estate loans of $44.5 million. U.S. bank customers currently have $71.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Scottsburg Building and Loan Association exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors during periods of financial trouble for the bank. It follows then that when it comes to measuring an a bank's financial stability, capital is essential. When looking at safety and soundness, the higher the capital, the better.

Scottsburg Building and Loan Association exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 18 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Scottsburg Building and Loan Association's Tier 1 capital ratio was 29.11 percent, above the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Scottsburg Building and Loan Association held equity amounting to 13.60 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually have to use capital to absorb losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

Scottsburg Building and Loan Association did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.09 percent of Scottsburg Building and Loan Association'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Scottsburg Building and Loan Association's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses take away from a bank's ability to do those things.

Scottsburg Building and Loan Association fell short of the national average on Bankrate's test of earnings, achieving a score of 6 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Scottsburg Building and Loan Association's most recent annualized quarterly return on equity was 2.70 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $336,000 on total equity of $12.5 million. The bank reported an annualized return on average assets, or ROA, of 0.36 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.