Safe and Sound

Liberty Bank

Ironton, OH
4
Star Rating
Ironton, OH-based Liberty Bank is an FDIC-insured bank founded in 1896. As of December 31, 2017, the bank held equity of $8.2 million on $53.1 million in assets.

Thanks to the work of 16 full-time employees in 2 offices in OH, the bank has amassed loans and leases worth $32.9 million, including real estate loans of $29.2 million. U.S. bank customers currently have $43.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 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 evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders when a bank is experiencing financial instability. It follows then that when it comes to measuring an an institution's financial resilience, capital is useful. When it comes to safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, Liberty Bank achieved a score of 22 out of a possible 30 points, exceeding the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Liberty Bank's Tier 1 capital ratio was 29.51 percent, above the 6 percent level considered adequate by regulators, and above 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 held equity amounting to 15.43 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to cover losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and increasing the risk of a failure in the future.

Liberty Bank came in below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.25 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 1.01 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk 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 Liberty Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand financial trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, Liberty Bank scored 8 out of a possible 30, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Liberty Bank was 3.58 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $289,000 on total equity of $8.2 million. The bank experienced an annualized return on average assets, or ROA, of 0.54 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.