Safe and Sound

Friends Bank

New Smyrna Beach, FL
4
Star Rating
New Smyrna Beach, FL-based Friends Bank is an FDIC-insured bank started in 2000. Regulatory filings show the bank having equity of $8.7 million on $97,512,000 in assets, as of June 30, 2017.

U.S. bank customers have $88.6 million on deposit at 3 offices in FL run by 28 full-time employees. With that footprint, the bank holds loans and leases worth $69.4 million, $70.0 million of which are for real estate.

Overall, Bankrate believes that, as of June 30, 2017, Friends Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank faired on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors during periods of economic instability for the bank. It follows then that a bank's level of capital is an important measurement of a bank's financial resilience. When looking at safety and soundness, more capital is preferred.
Friends Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.38.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Friends Bank's Tier 1 capital ratio was 13.23 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, Friends Bank held equity amounting to 8.89 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having lots of these types of assets could eventually force a bank 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 no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

Friends Bank fell short of the national average of 37.62 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.15 percent of Friends 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 1.04 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the that reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Friends Bank's loan loss allowance was 1,381.55 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

Friends Bank scored 12 out of a possible 30 on Bankrate's test of earnings, less than the national average of 16.52.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Friends Bank was 5.69 percent, below the national average of 9.28 percent.

The bank earned net income of $243,000 on total equity of $8.7 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 0.48 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.