Safe and Sound

Lake City Bank

Warsaw, IN
5
Star Rating
Started in 1872, Lake City Bank is an FDIC-insured bank based in Warsaw, IN. The bank holds equity of $482.7 million on $4.67 billion in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 539 full-time employees in 51 offices in IN, the bank holds loans and leases worth $3.77 billion, including real estate loans of $2.01 billion. The bank currently holds $4.01 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Lake City Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at 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

Capital is a crucial measurement of an institution's financial strength. It works as a cushion against losses and as protection for accountholders during times of financial trouble for the bank. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Lake City Bank received a score of 12 out of a possible 30 points, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Lake City Bank's Tier 1 capital ratio was 11.73 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, Lake City Bank held equity amounting to 10.33 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 problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Lake City Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

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, 0.25 percent of Lake City 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 troubled assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Lake City Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

Lake City Bank scored 22 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Lake City Bank's most recent annualized quarterly return on equity was 13.22 percent, above the national average of 8.10 percent.

The bank reported net income of $61.3 million on total equity of $482.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.39 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.