Safe and Sound

Lake Country Community Bank

Morristown, MN
2
Star Rating
Morristown, MN-based Lake Country Community Bank is an FDIC-insured bank started in 1928. The bank holds equity of $2.4 million on $26.1 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $22.4 million on deposit at 2 offices in MN run by 7 full-time employees. With that footprint, the bank currently holds loans and leases worth $16.6 million, $11.0 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Lake Country Community Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is valuable. It acts as a buffer against losses and as protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, Lake Country Community Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Lake Country Community Bank's Tier 1 capital ratio was 11.04 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 difficulties.

Overall, Lake Country Community Bank held equity amounting to 9.28 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 past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these types of assets could eventually have to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Lake Country Community Bank finished below the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.36 percent of Lake Country 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 above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Lake Country Community 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, increasing its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Lake Country Community Bank scored 0 out of a possible 30, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. Lake Country Community Bank's most recent annualized quarterly return on equity was -0.88 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $-22,000 on total equity of $2.4 million. The bank had an annualized return on average assets, or ROA, of -0.08 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.