Safe and Sound

The Bank of Delmarva

Seaford, DE
4
Star Rating
Started in 1896, The Bank of Delmarva is an FDIC-insured bank based in Seaford, DE. The bank has equity of $50.7 million on $562.1 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 129 full-time employees in 13 offices in multiple states, the bank holds loans and leases worth $462.7 million, including real estate loans of $425.0 million. U.S. bank customers currently have $465.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Bank of Delmarva exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important 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 stability, capital is crucial. It works as a cushion against losses and as protection for accountholders during times of economic trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

The Bank of Delmarva received a score of 10 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. The Bank of Delmarva's Tier 1 capital ratio was 11.09 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, The Bank of Delmarva held equity amounting to 9.02 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 problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually be forced to use capital to absorb losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and elevating the risk of a future failure.

The Bank of Delmarva scored 32 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.24 percent of The Bank of Delmarva's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Bank of Delmarva'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, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial trouble. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, The Bank of Delmarva scored 16 out of a possible 30, exceeding the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The Bank of Delmarva's most recent annualized quarterly return on equity was 7.22 percent, below the national average of 8.10 percent.

The bank recorded net income of $3.6 million on total equity of $50.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.67 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.