Safe and Sound

Bank of Botetourt

Buchanan, VA
4
Star Rating
Founded in 1899, Bank of Botetourt is an FDIC-insured bank based in Buchanan, VA. Regulatory filings show the bank having equity of $35.0 million on assets of $388.6 million, as of December 31, 2017.

Thanks to the work of 107 full-time employees in 12 offices in VA, the bank has amassed loans and leases worth $338.1 million, $297.3 million of which are for real estate. The bank currently holds $341.9 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Botetourt exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors when a bank is experiencing financial instability. It follows then that when it comes to measuring an a bank's financial stability, capital is important. From a safety and soundness perspective, the higher the capital, the better.

Bank of Botetourt came in below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. Bank of Botetourt's Tier 1 capital ratio was 10.93 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Bank of Botetourt held equity amounting to 9.01 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets could eventually be required to use capital to absorb losses, diminishing its equity cushion. 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 reduced earnings and potentially more risk of a failure in the future.

Bank of Botetourt scored below the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.71 percent of Bank of Botetourt's loans were noncurrent -- in other words, 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 deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bank of Botetourt's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's test of earnings, Bank of Botetourt scored 14 out of a possible 30, failing to reach the national average of 15.12.

One key way to measure 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 Bank of Botetourt was 6.62 percent, below the national average of 8.10 percent.

The bank recorded net income of $2.3 million on total equity of $35.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.62 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.