Safe and Sound

Liberty Bank

Middletown, CT
5
Star Rating
Started in 1825, Liberty Bank is an FDIC-insured bank headquartered in Middletown, CT. The bank holds equity of $706.8 million on $4.77 billion in assets, according to December 31, 2017, regulatory filings.

With 686 full-time employees in 55 offices in CT, the bank currently holds loans and leases worth $3.59 billion, including real estate loans of $3.11 billion. U.S. bank customers currently have $3.55 billion in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is a key measurement of a bank's financial fortitude. From a safety and soundness perspective, more capital is preferred.

Liberty Bank scored 20 out of a possible 30 points on our test to measure capital adequacy, beating 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 14.87 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Liberty Bank held equity amounting to 14.82 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

Having a large number of these types of assets means a bank could have to use capital to absorb 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, pushing down earnings and increasing the chances of a failure in the future.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.35 percent of Liberty Bank's loans were noncurrent, meaning 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled 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

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's test of earnings, Liberty Bank scored 12 out of a possible 30, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Liberty Bank was 5.92 percent, below the national average of 8.10 percent.

The bank recorded net income of $40.2 million on total equity of $706.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.85 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.