Safe and Sound

The Bank of Clarendon

Manning, SC
5
Star Rating
Manning, SC-based The Bank of Clarendon is an FDIC-insured bank founded in 1939. Regulatory filings show the bank having equity of $35.4 million on assets of $269.3 million, as of December 31, 2017.

Thanks to the work of 50 full-time employees in 5 offices in SC, the bank has amassed loans and leases worth $141.8 million, $111.5 million of which are for real estate. U.S. bank customers currently have $226.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Bank of Clarendon exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is useful. It acts as a cushion against losses and affords protection for depositors when a bank is experiencing economic trouble. When it comes to safety and soundness, the higher the capital, the better.

The Bank of Clarendon did better than the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 18 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The Bank of Clarendon's Tier 1 capital ratio was 22.27 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, The Bank of Clarendon held equity amounting to 13.16 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these types of assets may eventually be required to use capital to cover losses, diminishing its equity buffer. 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 lower earnings and potentially more risk of a future failure.

The Bank of Clarendon exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.31 percent of The Bank of Clarendon'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Bank of Clarendon's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, likely making the bank better able to withstand economic trouble. Banks that are losing money, however, have less ability to do those things.

The Bank of Clarendon fell short of the national average on Bankrate's earnings test, achieving a score of 12 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for The Bank of Clarendon was 5.94 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $2.1 million on total equity of $35.4 million. The bank reported an annualized return on average assets, or ROA, of 0.79 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.