Safe and Sound

Lake City Federal Bank

Lake City, MN
2
Star Rating
Founded in 1934, Lake City Federal Bank is an FDIC-insured bank based in Lake City, MN. As of December 31, 2017, the bank held equity of $7.9 million on assets of $74.1 million.

With 16 full-time employees, the bank currently holds loans and leases worth $53.3 million, including real estate loans of $49.4 million. U.S. bank customers currently have $61.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Lake City Federal Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a crucial measurement of an institution's financial fortitude. When looking at safety and soundness, more capital is preferred.

Lake City Federal Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Lake City Federal Bank's Tier 1 capital ratio was 17.47 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, Lake City Federal Bank held equity amounting to 10.68 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these types of assets could eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the risk of a failure in the future.

Lake City Federal Bank fell below the national average of 37.49 on Bankrate's asset quality test, racking up 16 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, 7.23 percent of Lake City Federal 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Lake City Federal Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

Lake City Federal Bank fell behind the national 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, basically) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Lake City Federal Bank was 2.55 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $199,000 on total equity of $7.9 million. The bank experienced an annualized return on average assets, or ROA, of 0.28 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.