LACE Financial specializes in assessing the financial soundness of financial institutions. Founded in 1984, the company has been recognized as an impartial and innovative leader in providing credit rating services for approximately 19,000 domestic and international financial institutions, non-financial institutions, title insurers, and foreign country sovereign ratings. Typically, LACE Financial does not accept compensation for its ratings and is therefore independent and unbiased when assigning credit ratings. Typical clients that use LACE Financial' s credit ratings include cash managers and treasurers of Fortune 500 companies, state municipalities and other government agencies, investment banks and portfolio managers. Each quarter, LACE Financial Corporation provides its clients with up to date credit ratings on all rated domestic banking institutions.
LACE Financial Credit Ratings are a measure of the overall financial condition of an institution and its ability to meet its credit obligations. Over the past twenty plus years, LACE Financial Corporation has issued more than a million financial credit ratings.
A+ and A An institution that has an exceptional financial condition, little or no nonperforming assets, and is highly capitalized with strong earnings. These grades are the highest level of financial soundness.
B+ An institution with an overall strong financial condition, but not as strong as A+ and A rated companies. The company will have the resources to meet its credit obligations under severe economic, financial and business conditions.
B An institution with an adequate financial condition that is likely to meet its credit obligations under severe economic, financial and business conditions.
B- and C+ An institution with an adequate financial condition but is more susceptible to adverse changes in economic conditions that could affect its ability to meet its credit obligations under severe economic, financial or business conditions. These grades are the lowest investment grade ratings.
C and C- An institution whose financial condition is judged to be relatively weak and its ability to meet financial obligations could be affected by adverse economic, financial or business conditions. These grades are considered non-investment grade ratings.
D and E Institutions are likely to have financial problems (poor LACE Financial ratios) and careful consideration should be made about investments in these institutions. These institutions are likely to have a higher probability of failure than institutions with higher ratings. LACE Financial recommends that all credits on D and E rated institutions be secured. These grades are considered non-investment grade ratings.
New banks, less than three years old, are not rated.
LACE Financial has made significant improvements to its products and services, such as, progressing a corporate rating service, and delivering our LACE Credit Ratings through our web-based LACE Monitor system, which is described below.
An efficient and user-friendly online service allowing users to quickly view detailed current and historical financial information, LACE Credit Ratings, and key financial ratios for domestic banks, savings & loans, credit unions, bank holding companies and international banks. In addition, users are able to create and save queries and export information to various file formats. Consultation is included in all subscription fees to provide clients with more information or a better understanding of why a particular institution's credit rating changed. The database program may be used to further classify areas of interest:
Furthermore, the LACE Monitor System is a database program, that enables the user to:
LACE Monitor System data reports can be customized to contain data on banks, savings and loans, and credit unions, and any combination thereof.
This service is a quarterly update on the banks and savings & loans that LACE Financial believes has a higher than normal probability of failure. The book includes the Institutions of Concern, which are the approximate bottom fifty banks in terms of financial soundness. In addition, all non-investment grade banks are listed by state along with key financial data and current and historical LACE Credit Ratings
LACE Financial' s New Issue Rating services are available for subordinated debt securities issued by an individual institution or a pool of trust-preferred securities. The rating process involves an extensive financial analysis and assignment of a new issue rating or credit rating to the individual institution or each issuer participating in the pool. The institutions' financial conditions are evaluated for the most recent quarter and compared to past quarters to determine the stability of their financial condition.
LACE Financial New Issue Ratings are an evaluation of the degree of certainty of interest and principal payments against long-term obligations. Default risk, along with the probability of failure of the financial institution are the main elements of the rating.
The individual institution reports are designed for clients who require a more comprehensive analysis of a specific institution. Quantitative information is also provided with the report and includes the most recent financial information, key LACE ratios, and current and historical LACE Credit Ratings. The institution analysis begins with a company profile describing the products and services offered and the primary banking markets the institution operates in. Any major shift of business strategy or recent M&A activity is also highlighted in this section. The institution is analyzed on a consolidated holding company level, focusing primarily on the four LACE determinants of financial soundness (Liquidity, Asset Quality, Capital, Earnings), with descriptions of any changes described and how those determinants compare to their peer group averages. Any outstanding long-term debt or trust preferred security issues are also taken into account to properly assess the institution's ability to meet its credit obligations. The institution is then analyzed on a parent company-only basis to ensure any parent company loans or liabilities, which are not consolidated in the holding company's financial statements, are included in the overall credit rating. A detailed analysis of the lead-banking subsidiary is performed, focusing mainly on the four LACE determinants of financial soundness. The bank's ratios are compared to its peer group averages and reasons for changes in the four determinants are described. The bank's available-for-sale securities portfolio and lending portfolio are analyzed to highlight any potential risks.
A summary section is included to provide clients with LACE Financial' s outlook on the institution's overall financial soundness over the next six to twelve months. Taken into account are the analyses described above, the bank's primary markets, its future business strategy and growth potential, its earnings stability and the overall economic environment.
The appendix of the report includes the institution's most recent financial information and its key financial ratios, on a historical basis, graphically displayed in comparison to its peer group based on asset size and the overall banking industry. The institution's lending portfolio composition is also compared to its peer group.
Claims-Paying Ability Rating Service
LACE Financial rates the claims-paying ability of approximately 80 title insurance underwriters in the United States. Title insurance companies are rated semiannually, as their financial condition can be significantly affected by changes in interest rates and economic conditions, as well as fundamental changes within the industry itself.
The service enables mortgage lenders to comply with Fannie Mae's requirement that "Lenders must independently verify the ratings for the title insurance companies they use with the applicable rating agency once every six months." LACE Financial is an accepted rating company for title insurance underwriters by the Federal National Mortgage Association ("Fannie Mae").
LACE Financial Corporation has developed two separate services that contain Title Insurance Claims-Paying Ability Ratings:
Ratio/Item Definitions |
Data/Ratings Spread |
Financial Statements |
Background Information |
Areas of Operations |
|
|---|---|---|---|---|---|
| Extensive Service | Yes |
2 pages |
Yes |
Yes |
Yes |
| Standard Service | Yes |
2 pages |
No |
Yes |
Yes |
All Title Insurance Claims –Paying Ability Rating Services are published on a semiannual basis with a comprehensive year-end edition and a mid-year update. For any questions or a sample Claims-Paying Ability Rating Service report, please contact us.
Commercial Capacity Rating Service
The LACE Commercial Capacity Rating Service for Title Insurers is an independent source of critical information on the capacity of title insurers to write large policies--and to assume reinsurance--in conjunction with major commercial real estate and mortgage lending transactions. The service is designed to assist in the establishment of an insurer's single risk limit, as well as the structuring of facultative reinsurance transactions by financial institutions, major insurance companies, real estate attorneys, and other participants. In order to be included in the service, a title insurer must be capable of assuming a risk of at least $1,000,000. Included in the service are Capacity Ratings on the larger title insurance companies for underwriting commercial policies.
For more information about LACE products please visit the web site at: www.lacefinancial.com or contact LACE Financial directly at:
LACE Financial
Corporation
118 North Court Street
Frederick
MD 21701
USA
Tel: +00 1 301 662 1011
Fax: +00 1 301 662 1458
e-mail:inquiries@lacefinancial.com
Updated 20 September 2010.
