Safe and Sound

The Freedom Bank of Virginia

Fairfax, VA
4
Star Rating
The Freedom Bank of Virginia is an FDIC-insured bank started in 2001 and currently headquartered in Fairfax, VA. Regulatory filings show the bank having equity of $56.2 million on $533.3 million in assets, as of December 31, 2017.

Thanks to the efforts of 82 full-time employees in 3 offices in VA, the bank holds loans and leases worth $410.5 million, including $330.6 million worth of real estate loans. The bank currently holds $466.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Freedom Bank of Virginia exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial resilience, capital is useful. From a safety and soundness perspective, the higher the capital, the better.

The Freedom Bank of Virginia received a score of 12 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Freedom Bank of Virginia's Tier 1 capital ratio was 13.43 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, The Freedom Bank of Virginia held equity amounting to 10.55 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 loan loss reserves and overall capitalization.

Having a large number of these types of assets may eventually require a bank to use capital to absorb 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.

The Freedom Bank of Virginia scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding 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, 0.16 percent of The Freedom Bank of Virginia'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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Freedom Bank of Virginia's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

The Freedom Bank of Virginia received below-average marks on Bankrate's earnings test, achieving a score of 12 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The Freedom Bank of Virginia's most recent annualized quarterly return on equity was 5.31 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $2.9 million on total equity of $56.2 million. The bank reported an annualized return on average assets, or ROA, of 0.55 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.