Safe and Sound

South Louisiana Bank

Houma, LA
5
Star Rating
Houma, LA-based South Louisiana Bank is an FDIC-insured bank founded in 1980. As of December 31, 2017, the bank held equity of $62.8 million on assets of $461.8 million.

With 119 full-time employees in 7 offices in LA, the bank currently holds loans and leases worth $315.1 million, including real estate loans of $228.9 million. U.S. bank customers currently have $393.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, South Louisiana Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is experiencing economic trouble. Therefore, a bank's level of capital is a crucial measurement of a bank's financial strength. When it comes to safety and soundness, the more capital, the better.

South Louisiana Bank achieved a score of 18 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. South Louisiana Bank's Tier 1 capital ratio was 18.49 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, South Louisiana Bank held equity amounting to 13.59 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 problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with large numbers of these types of assets may eventually be required to use capital to cover losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, South Louisiana 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, 1.30 percent of South Louisiana 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 keep 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 at-risk loans. Unfortunately, the FDIC did not provide information on South Louisiana Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Losses, on the other hand, reduce a bank's ability to do those things.

South Louisiana Bank scored 14 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. South Louisiana Bank's most recent annualized quarterly return on equity was 6.10 percent, below the national average of 8.10 percent.

The bank earned net income of $3.9 million on total equity of $62.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.84 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.