Safe and Sound

Lake Shore Savings Bank

Dunkirk, NY
5
Star Rating
Lake Shore Savings Bank is an FDIC-insured bank founded in 1891 and currently based in Dunkirk, NY. Regulatory filings show the bank having equity of $74.7 million on $518.4 million in assets, as of December 31, 2017.

Thanks to the work of 111 full-time employees in 12 offices in NY, the bank holds loans and leases worth $365.1 million, $346.7 million of which are for real estate. U.S. bank customers currently have $409.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Lake Shore Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial fortitude. It acts as a bulwark against losses and as protection for depositors when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

Lake Shore Savings Bank racked up 20 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Lake Shore Savings Bank's Tier 1 capital ratio was 20.82 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Lake Shore Savings Bank held equity amounting to 14.42 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets could eventually force a bank to use capital to cover losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Lake Shore Savings Bank scored 40 out of a possible 40 points, better than the national average of 37.49 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, 1.05 percent of Lake Shore Savings Bank's loans were noncurrent, meaning 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 to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Lake Shore Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, likely making the bank better able to withstand economic shocks. Conversely, losses reduce a bank's ability to do those things.

Lake Shore Savings Bank fell short of the national average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. Lake Shore Savings Bank's most recent annualized quarterly return on equity was 4.77 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.5 million on total equity of $74.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.69 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.