Safe and Sound

Clear Lake Bank and Trust Company

Clear Lake, IA
5
Star Rating
Clear Lake Bank and Trust Company is an FDIC-insured bank started in 1934 and currently headquartered in Clear Lake, IA. Regulatory filings show the bank having equity of $34.4 million on assets of $405.8 million, as of December 31, 2017.

U.S. bank customers have $363.3 million on deposit at 5 offices in IA run by 91 full-time employees. With that footprint, the bank has amassed loans and leases worth $306.8 million, $222.9 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Clear Lake Bank and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important 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 acts as a bulwark against losses and provides protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a useful measurement of an institution's financial strength. From a safety and soundness perspective, the more capital, the better.

Clear Lake Bank and Trust Company received a score of 6 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Clear Lake Bank and Trust Company's Tier 1 capital ratio was 10.33 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, Clear Lake Bank and Trust Company held equity amounting to 8.48 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having large numbers of these kinds of assets means a bank may have to use capital to cover losses, decreasing its buffer 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 lower earnings and potentially more risk of a failure in the future.

Clear Lake Bank and Trust Company beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 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, 0.08 percent of Clear Lake Bank and Trust Company'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." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Clear Lake Bank and Trust Company's loan loss allowance was 1,606.61 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

Clear Lake Bank and Trust Company did above-average on Bankrate's test of earnings, achieving a score of 28 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Clear Lake Bank and Trust Company was 20.04 percent, above the national average of 8.10 percent.

The bank recorded net income of $6.8 million on total equity of $34.4 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.73 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.