Safe and Sound

Liberty Trust & Savings Bank

Durant, IA
5
Star Rating
Started in 1905, Liberty Trust & Savings Bank is an FDIC-insured bank based in Durant, IA. The bank has equity of $28.7 million on $152.7 million in assets, according to December 31, 2017, regulatory filings.

With 23 full-time employees in 4 offices in IA, the bank currently holds loans and leases worth $82.3 million, including real estate loans of $46.3 million. U.S. bank customers currently have $111.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Liberty Trust & Savings Bank 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 key criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is important. It acts as a cushion against losses and provides protection for depositors during times of economic trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

Liberty Trust & Savings Bank beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 28 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Liberty Trust & Savings Bank's Tier 1 capital ratio was 29.40 percent, exceeding the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, Liberty Trust & Savings Bank held equity amounting to 18.81 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 loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

A bank with extensive holdings of these types of assets may eventually be forced to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and elevating the chances of a failure in the future.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Liberty Trust & Savings 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 to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Liberty Trust & Savings Bank's loan loss allowance was 144,500.00 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

Liberty Trust & Savings Bank fell behind the national average on Bankrate's earnings test, achieving a score of 14 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Liberty Trust & Savings Bank was 6.21 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.8 million on total equity of $28.7 million. The bank reported an annualized return on average assets, or ROA, of 1.15 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.