Safe and Sound

Lee County Bank

Fort Madison, IA
5
Star Rating
Lee County Bank is a Fort Madison, IA-based, FDIC-insured bank started in 1888. The bank has equity of $20.0 million on $158.4 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $122.2 million on deposit at 3 offices in IA run by 33 full-time employees. With that footprint, the bank holds loans and leases worth $126.4 million, including $104.4 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Lee County Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is useful. It acts as a cushion against losses and as protection for depositors during periods of economic trouble for the bank. When it comes to safety and soundness, the more capital, the better.

Lee County Bank achieved a score of 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Lee County Bank's Tier 1 capital ratio was 19.96 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 weather economic headwinds.

Overall, Lee County Bank held equity amounting to 12.60 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due mortgages.

Having a large number of these kinds of assets means a bank could have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Lee County Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 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, 0.68 percent of Lee County 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Lee County Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

Lee County Bank beat the national average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Lee County Bank was 11.88 percent, above the national average of 8.10 percent.

The bank recorded net income of $2.3 million on total equity of $20.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.48 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.