Safe and Sound

Lee Bank and Trust Company

Pennington Gap, VA
4
Star Rating
Pennington Gap, VA-based Lee Bank and Trust Company is an FDIC-insured bank founded in 1932. The bank has equity of $21.3 million on $152.4 million in assets, according to December 31, 2017, regulatory filings.

With 50 full-time employees in 4 offices in VA, the bank currently holds loans and leases worth $113.0 million, including real estate loans of $83.8 million. U.S. bank customers currently have $129.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Lee Bank and Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial resilience. It acts as a buffer against losses and as protection for depositors during times of economic instability for the bank. From a safety and soundness perspective, the more capital, the better.

Lee Bank and Trust Company achieved a score of 20 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Lee Bank and Trust Company's Tier 1 capital ratio was 22.42 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, Lee Bank and Trust Company held equity amounting to 14.00 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

Having lots of these types of assets suggests a bank could eventually have to use capital to cover losses, diminishing its equity cushion. 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, reducing earnings and elevating the risk of a failure in the future.

Lee Bank and Trust Company scored 36 out of a possible 40 points on Bankrate's test of asset quality, coming in below the national average of 37.49.

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, 0.87 percent of Lee 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Lee Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Lee Bank and Trust Company underperformed the average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Lee Bank and Trust Company was 4.27 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $916,000 on total equity of $21.3 million. The bank had an annualized return on average assets, or ROA, of 0.60 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.