Safe and Sound

Bank of the James

Lynchburg, VA
4
Star Rating
Lynchburg, VA-based Bank of the James is an FDIC-insured bank founded in 1999. The bank holds equity of $55.7 million on $626.6 million in assets, according to December 31, 2017, regulatory filings.

With 145 full-time employees in 16 offices in VA, the bank has amassed loans and leases worth $493.6 million, including real estate loans of $419.1 million. U.S. bank customers currently have $568.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of the James exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders during periods of economic trouble for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is important. When it comes to safety and soundness, the more capital, the better.

Bank of the James received a score of 8 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of the James's Tier 1 capital ratio was 11.13 percent, higher than the 6 percent level regulators consider adequate, but lower 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 downturns.

Overall, Bank of the James held equity amounting to 8.88 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these kinds of assets could eventually require a bank to use capital to cover losses, shrinking its cushion of equity. 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.

Bank of the James scored 36 out of a possible 40 points on Bankrate's asset quality test, failing to reach the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.86 percent of Bank of the James'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 . Comparing the size of that reserve to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Bank of the James'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, expanding its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Bank of the James did below-average on Bankrate's earnings test, achieving a score of 12 out of a possible 30.

One widely used 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 Bank of the James was 6.07 percent, below the national average of 8.10 percent.

The bank earned net income of $3.2 million on total equity of $55.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.54 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.