Safe and Sound

Carter Bank & Trust

Martinsville, VA
2
Star Rating
Carter Bank & Trust is an FDIC-insured bank founded in 2006 and currently based in Martinsville, VA. As of June 30, 2017, the bank had equity of $439.5 million on assets of $4.31 billion.

U.S. bank customers have $3.86 billion on deposit at 123 offices in multiple states run by 946 full-time employees. With that footprint, the bank has amassed loans and leases worth $2.63 billion, including real estate loans of $1.82 billion.

Overall, Bankrate believes that, as of June 30, 2017, Carter Bank & Trust exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is experiencing financial trouble. Therefore, when it comes to measuring an an institution's financial stability, capital is important. From a safety and soundness perspective, more capital is preferred.
Carter Bank & Trust fell below the national average of 13.38 on our test to measure the adequacy of a bank's capital, racking up 8 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Carter Bank & Trust's Tier 1 capital ratio was 12.79 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Carter Bank & Trust held equity amounting to 10.20 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets may eventually have to use capital to cover losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Carter Bank & Trust scored 20 out of a possible 40 points, lower than the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 4.50 percent of Carter Bank & Trust's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Carter Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

Carter Bank & Trust underperformed the average on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Carter Bank & Trust was 2.20 percent, below the national average of 9.28 percent.

The bank earned net income of $4.8 million on total equity of $439.5 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.22 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.