Safe and Sound

Liberty Bank

Geraldine, AL
4
Star Rating
Founded in 1971, Liberty Bank is an FDIC-insured bank headquartered in Geraldine, AL. Regulatory filings show the bank having equity of $15.6 million on assets of $138.0 million, as of June 30, 2017.

With 53 full-time employees in 6 offices in AL, the bank has amassed loans and leases worth $65.4 million, including real estate loans of $45.7 million. U.S. bank customers currently have $122.2 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Liberty Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial fortitude. It works as a cushion against losses and affords protection for accountholders when a bank is experiencing economic trouble. When looking at safety and soundness, the higher the capital, the better.
Liberty Bank did better than the national average of 13.38 points on our test to measure the adequacy of a bank's capital, receiving a score of 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Liberty Bank's Tier 1 capital ratio was 15.70 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Liberty Bank held equity amounting to 11.30 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these kinds of assets may eventually be forced to use capital to absorb losses, cutting down on 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, Liberty Bank scored 36 out of a possible 40 points, coming in below the national average of 37.62 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 1.39 percent of Liberty 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 1.04 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Liberty Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand financial trouble. However, banks that are losing money are less able to do those things.

Liberty Bank scored 14 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Liberty Bank's most recent annualized quarterly return on equity was 6.33 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $476,000 on total equity of $15.6 million. The bank had an annualized return on average assets, or ROA, of 0.71 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.