Safe and Sound

Lawrenceburg Federal Bank

Lawrenceburg, TN
5
Star Rating
Lawrenceburg Federal Bank is an FDIC-insured bank started in 1934 and currently headquartered in Lawrenceburg, TN. Regulatory filings show the bank having equity of $14.4 million on assets of $62.5 million, as of December 31, 2017.

With 11 full-time employees, the bank holds loans and leases worth $57.8 million, including real estate loans of $55.8 million. U.S. bank customers currently have $46.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Lawrenceburg Federal Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors during periods of economic instability for the bank. Therefore, a bank's level of capital is an important measurement of a bank's financial resilience. When looking at safety and soundness, the higher the capital, the better.

Lawrenceburg Federal Bank racked up 30 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Lawrenceburg Federal Bank's Tier 1 capital ratio was 41.12 percent, exceeding the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Lawrenceburg Federal Bank held equity amounting to 23.07 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets may eventually force a bank to use capital to cover losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Lawrenceburg Federal Bank scored 36 out of a possible 40 points, coming in below 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, 2.19 percent of Lawrenceburg Federal 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Lawrenceburg Federal 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, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money are less able to do those things.

Lawrenceburg Federal Bank received below-average marks on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Lawrenceburg Federal Bank's most recent annualized quarterly return on equity was 4.07 percent, below the national average of 8.10 percent.

The bank earned net income of $575,000 on total equity of $14.4 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.93 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.