Safe and Sound

Lyons Federal Bank

Lyons, KS
4
Star Rating
Lyons Federal Bank is an FDIC-insured bank founded in 1913 and currently headquartered in Lyons, KS. Regulatory filings show the bank having equity of $14.8 million on assets of $118.3 million, as of December 31, 2017.

With 23 full-time employees in 4 offices in KS, the bank has amassed loans and leases worth $77.2 million, including real estate loans of $53.2 million. U.S. bank customers currently have $93.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Lyons Federal Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an an institution's financial fortitude, capital is crucial. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Lyons Federal Bank racked up 14 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Lyons Federal Bank's Tier 1 capital ratio was 17.34 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, Lyons Federal Bank held equity amounting to 12.50 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 unpaid loans.

Having a large number of these types of assets means a bank may eventually have to use capital to absorb losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a future failure.

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

A useful 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 Lyons Federal 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 problem assets . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Lyons Federal Bank's loan loss allowance was 44,700.00 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Lyons Federal Bank underperformed the average on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Lyons Federal Bank was 3.31 percent, below the national average of 8.10 percent.

The bank earned net income of $431,000 on total equity of $14.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.42 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.