Safe and Sound

The Bank of Marion

Marion, VA
5
Star Rating
Marion, VA-based The Bank of Marion is an FDIC-insured bank founded in 1874. The bank has equity of $42.6 million on $383.6 million in assets, according to December 31, 2017, regulatory filings.

With 106 full-time employees in 15 offices in multiple states, the bank has amassed loans and leases worth $211.5 million, including real estate loans of $183.2 million. U.S. bank customers currently have $338.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Bank of Marion exhibited a superior condition, earning a full 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 U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is key. It acts as a bulwark against losses and as protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

The Bank of Marion achieved a score of 14 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. The Bank of Marion's Tier 1 capital ratio was 19.92 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, The Bank of Marion held equity amounting to 11.11 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 troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these types of assets means a bank may eventually have to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the risk of a failure in the future.

On Bankrate's test of asset quality, The Bank of Marion scored 40 out of a possible 40 points, above the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.97 percent of The Bank of Marion'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 . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Bank of Marion's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

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

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The Bank of Marion's most recent annualized quarterly return on equity was 7.10 percent, below the national average of 8.10 percent.

The bank recorded net income of $3.0 million on total equity of $42.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.80 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.