Safe and Sound

Liberty Bank Minnesota

Saint Cloud, MN
5
Star Rating
Saint Cloud, MN-based Liberty Bank Minnesota is an FDIC-insured bank started in 1987. Regulatory filings show the bank having equity of $25.0 million on $210.0 million in assets, as of December 31, 2017.

U.S. bank customers have $184.9 million on deposit at 6 offices in MN run by 53 full-time employees. With that footprint, the bank has amassed loans and leases worth $104.6 million, $101.0 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Liberty Bank Minnesota exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial strength. It works as a cushion against losses and provides protection for depositors during times of economic instability for the bank. When looking at safety and soundness, the more capital, the better.

Liberty Bank Minnesota scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Liberty Bank Minnesota's Tier 1 capital ratio was 22.49 percent, above the 6 percent level considered adequate by regulators, but less than 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, Liberty Bank Minnesota held equity amounting to 11.92 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine 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 could eventually be forced to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and elevating the risk of a failure in the future.

On Bankrate's asset quality test, Liberty Bank Minnesota scored 40 out of a possible 40 points, beating the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.15 percent of Liberty Bank Minnesota'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve 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 Liberty Bank Minnesota's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Liberty Bank Minnesota scored 26 out of a possible 30, exceeding the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. Liberty Bank Minnesota's most recent annualized quarterly return on equity was 17.94 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $4.3 million on total equity of $25.0 million. The bank experienced an annualized return on average assets, or ROA, of 2.06 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.