Improving credit quality as a result of post-GFC recovery has led to a strong environment for growth in the banking sector.
As a small-cap bank with a market capitalisation of US$112.3m, Limestone Bancorp Inc’s (NASDAQ:LMST) profit and value are directly affected by economic growth. This is because borrowers’ demand for, and ability to repay, their loans depend on the stability of their salaries and interest rates. Risk associated with repayment is measured by bad debt which is written off as an expense, impacting Limestone Bancorp’s bottom line.
Today I will take you through some bad debt and liability measures to analyse the level of risky assets held by the bank. Looking through a risk-lens is a useful way to assess the attractiveness of Limestone Bancorp’s a stock investment.
View our latest analysis for Limestone Bancorp
How Good Is Limestone Bancorp At Forecasting Its Risks?
Limestone Bancorp’s ability to forecast and provision for its bad loans indicates it has a good understanding of the level of risk it is taking on.
If the level of provisioning covers 100% or more of the actual bad debt expense the bank writes…
