Safe and Sound

Escambia County Bank

Flomaton, AL
4
Star Rating
Flomaton, AL-based Escambia County Bank is an FDIC-insured bank started in 1924. Regulatory filings show the bank having equity of $11.1 million on $72.4 million in assets, as of December 31, 2017.

With 19 full-time employees, the bank holds loans and leases worth $24.8 million, including real estate loans of $14.5 million. U.S. bank customers currently have $61.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Escambia County Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an an institution's financial resilience, capital is useful. When looking at safety and soundness, the more capital, the better.

Escambia County Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, racking up 22 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Escambia County Bank's Tier 1 capital ratio was 34.47 percent, higher than the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Escambia County Bank held equity amounting to 15.39 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

A bank with lots of these types of assets could eventually be required to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a failure in the future.

Escambia County Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 2.66 percent of Escambia County Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Escambia County Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, Escambia County Bank scored 6 out of a possible 30, less than the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Escambia County Bank was 2.11 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $236,000 on total equity of $11.1 million. The bank reported an annualized return on average assets, or ROA, of 0.32 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.