Safe and Sound

Towne Bank

Portsmouth, VA
4
Star Rating
Founded in 1999, Towne Bank is an FDIC-insured bank headquartered in Portsmouth, VA. Regulatory filings show the bank having equity of $1.14 billion on $8.52 billion in assets, as of December 31, 2017.

Thanks to the efforts of 2,131 full-time employees in 38 offices in multiple states, the bank holds loans and leases worth $6.22 billion, $4.94 billion of which are for real estate. U.S. bank customers currently have $6.47 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Towne Bank 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 major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders when a bank is experiencing economic instability. It follows then that a bank's level of capital is a crucial measurement of a bank's financial fortitude. When it comes to safety and soundness, the higher the capital, the better.

Towne Bank scored below the national average of 13.13 on our test to measure capital adequacy, scoring 12 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Towne Bank's Tier 1 capital ratio was 12.19 percent, exceeding 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 weather economic challenges.

Overall, Towne Bank held equity amounting to 13.27 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these types of assets may eventually be required to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and increasing the chances of a future failure.

Towne Bank scored above 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, 0.09 percent of Towne Bank'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 to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Towne Bank'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, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

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

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Towne Bank's most recent annualized quarterly return on equity was 7.92 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $87.7 million on total equity of $1.14 billion. The bank experienced an annualized return on average assets, or ROA, of 1.05 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.