Safe and Sound

Bank of Lake Mills

Lake Mills, WI
4
Star Rating
Bank of Lake Mills is an FDIC-insured bank founded in 1893 and currently based in Lake Mills, WI. Regulatory filings show the bank having equity of $23.8 million on assets of $199.6 million, as of December 31, 2017.

With 48 full-time employees in 2 offices in WI, the bank has amassed loans and leases worth $158.6 million, including real estate loans of $148.9 million. U.S. bank customers currently have $166.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Lake Mills 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 grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for depositors during times of financial instability for the bank. Therefore, a bank's level of capital is an important measurement of a bank's financial strength. When it comes to safety and soundness, the more capital, the better.

Bank of Lake Mills beat out the national average of 13.13 points on our test to measure capital adequacy, scoring 14 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Bank of Lake Mills's Tier 1 capital ratio was 15.75 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Bank of Lake Mills held equity amounting to 11.91 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these types of assets may eventually have to use capital to absorb losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.46 percent of Bank of Lake Mills's loans were noncurrent, meaning 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 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 helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of Lake Mills's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

Bank of Lake Mills exceeded the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Bank of Lake Mills was 9.58 percent, above the national average of 8.10 percent.

The bank reported net income of $2.3 million on total equity of $23.8 million for the twelve months ended December 31, 2017. The bank experienced 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.