Safe and Sound

LNB Community Bank

Lynnville, IN
4
Star Rating
Lynnville, IN-based LNB Community Bank is an FDIC-insured bank started in 1907. As of December 31, 2017, the bank had equity of $11.9 million on assets of $116.7 million.

Thanks to the efforts of 33 full-time employees in 4 offices in IN, the bank has amassed loans and leases worth $81.1 million, including $70.0 million worth of real estate loans. The bank currently holds $102.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, LNB Community Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial resilience. It works as a buffer against losses and affords protection for depositors when a bank is experiencing financial instability. When it comes to safety and soundness, more capital is preferred.

LNB Community Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. LNB Community Bank's Tier 1 capital ratio was 16.63 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, LNB Community Bank held equity amounting to 10.23 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 effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these types of assets may eventually force a bank to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, LNB Community Bank scored 36 out of a possible 40 points, falling short of 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, 0.35 percent of LNB Community 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on LNB Community Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money are less able to do those things.

LNB Community Bank outperformed the average on Bankrate's earnings test, achieving a score of 16 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for LNB Community Bank was 7.75 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $902,000 on total equity of $11.9 million. The bank reported an annualized return on average assets, or ROA, of 0.80 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.