Safe and Sound

Virginia Commonwealth Bank

Kilmarnock, VA
2
Star Rating
Kilmarnock, VA-based Virginia Commonwealth Bank is an FDIC-insured bank founded in 1930. Regulatory filings show the bank having equity of $95.0 million on assets of $965.2 million, as of December 31, 2017.

U.S. bank customers have $784.5 million on deposit at 18 offices in VA run by 158 full-time employees. With that footprint, the bank currently holds loans and leases worth $760.4 million, including $611.5 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Virginia Commonwealth Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial resilience. It works as a cushion against losses and affords protection for accountholders when a bank is experiencing economic instability. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Virginia Commonwealth Bank received a score of 8 out of a possible 30 points, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Virginia Commonwealth Bank's Tier 1 capital ratio was 11.65 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 downturns.

Overall, Virginia Commonwealth Bank held equity amounting to 9.84 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

Having large numbers of these types of assets suggests a bank could eventually have to use capital to cover losses, diminishing 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 interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Virginia Commonwealth Bank scored 36 out of a possible 40 points, coming in below the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.96 percent of Virginia Commonwealth 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Virginia Commonwealth Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand financial trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Virginia Commonwealth Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important measure of a bank's earnings. Virginia Commonwealth Bank's most recent annualized quarterly return on equity was -0.23 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $-162,000 on total equity of $95.0 million. The bank reported an annualized return on average assets, or ROA, of -0.02 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.