Safe and Sound

Bank of Clarke County

Berryville, VA
4
Star Rating
Berryville, VA-based Bank of Clarke County is an FDIC-insured bank started in 1881. As of December 31, 2017, the bank had equity of $80.5 million on $757.8 million in assets.

U.S. bank customers have $663.8 million on deposit at 12 offices in VA run by 173 full-time employees. With that footprint, the bank has amassed loans and leases worth $561.6 million, including real estate loans of $516.7 million.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Clarke County exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is important. It works as a buffer against losses and affords protection for depositors when a bank is experiencing financial instability. From a safety and soundness perspective, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Bank of Clarke County received a score of 12 out of a possible 30 points, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Bank of Clarke County's Tier 1 capital ratio was 14.09 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, Bank of Clarke County held equity amounting to 10.62 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 capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

Having lots of these types of assets suggests a bank may eventually have to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Bank of Clarke County fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.12 percent of Bank of Clarke County'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 1.01 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of Clarke County's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses diminish a bank's ability to do those things.

Bank of Clarke County exceeded the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Bank of Clarke County was 10.03 percent, above the national average of 8.10 percent.

The bank earned net income of $7.9 million on total equity of $80.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.09 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.