Safe and Sound

Chesapeake Bank

Kilmarnock, VA
5
Star Rating
Started in 1900, Chesapeake Bank is an FDIC-insured bank based in Kilmarnock, VA. Regulatory filings show the bank having equity of $86.7 million on assets of $781.1 million, as of December 31, 2017.

With 184 full-time employees in 17 offices in VA, the bank holds loans and leases worth $517.6 million, including real estate loans of $391.4 million. U.S. bank customers currently have $677.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Chesapeake Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors during times of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is essential. When looking at safety and soundness, the more capital, the better.

Chesapeake Bank scored 14 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.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Chesapeake Bank's Tier 1 capital ratio was 13.60 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Chesapeake Bank held equity amounting to 11.11 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

A bank with lots of these kinds of assets may eventually be forced to use capital to absorb 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 interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Chesapeake Bank scored 36 out of a possible 40 points, less than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.99 percent of Chesapeake Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . 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 Chesapeake Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand financial shocks. However, banks that are losing money have less ability to do those things.

Chesapeake Bank scored 20 out of a possible 30 on Bankrate's test of earnings, better than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Chesapeake Bank was 11.58 percent, above the national average of 8.10 percent.

The bank earned net income of $9.6 million on total equity of $86.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.26 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.