Safe and Sound

Lake Community Bank

Long Lake, MN
5
Star Rating
Lake Community Bank is an FDIC-insured bank started in 1905 and currently based in Long Lake, MN. As of December 31, 2017, the bank held equity of $15.6 million on assets of $122.8 million.

Thanks to the work of 19 full-time employees, the bank currently holds loans and leases worth $86.4 million, $75.2 million of which are for real estate. The bank currently holds $107.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Lake Community Bank exhibited a superior condition, earning a full 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 on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for account holders when a bank is experiencing financial instability. It follows then that when it comes to measuring an a bank's financial strength, capital is key. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Lake Community Bank racked up 16 out of a possible 30 points, better than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Lake Community Bank's Tier 1 capital ratio was 16.20 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, Lake Community Bank held equity amounting to 12.71 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

A bank with lots of these types of assets could eventually have to use capital to absorb losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.30 percent of Lake Community Bank's loans were noncurrent -- in other words, 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Lake Community Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

Lake Community Bank scored 16 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Lake Community Bank was 7.84 percent, below the national average of 8.10 percent.

The bank reported net income of $1.2 million on total equity of $15.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.98 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.