Safe and Sound

Lake Central Bank

Annandale, MN
5
Star Rating
Lake Central Bank is an Annandale, MN-based, FDIC-insured bank founded in 1893. The bank has equity of $16.9 million on assets of $151.1 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $132.6 million on deposit at 2 offices in MN run by 34 full-time employees. With that footprint, the bank has amassed loans and leases worth $74.5 million, including real estate loans of $63.9 million.

Overall, Bankrate believes that, as of December 31, 2017, Lake Central 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 major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is important. It acts as a bulwark against losses and provides protection for accountholders during periods of financial trouble for the bank. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Lake Central Bank scored 14 out of a possible 30 points, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Lake Central Bank's Tier 1 capital ratio was 16.41 percent, higher than 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 weather economic difficulties.

Overall, Lake Central Bank held equity amounting to 11.21 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 impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets could eventually be required to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.73 percent of Lake Central Bank's loans were noncurrent -- in other words, 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Lake Central Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

Lake Central Bank scored 20 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Lake Central Bank was 11.96 percent, above the national average of 8.10 percent.

The bank reported net income of $2.0 million on total equity of $16.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.38 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.