Safe and Sound

Fairfield Federal Savings and Loan Association of Lancaster

Lancaster, OH
4
Star Rating
Fairfield Federal Savings and Loan Association of Lancaster is a Lancaster, OH-based, FDIC-insured bank that opened its doors in 1895. The bank has equity of $27.8 million on $264.8 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $226.6 million on deposit at 3 offices in OH run by 54 full-time employees. With that footprint, the bank holds loans and leases worth $233.9 million, $233.5 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Fairfield Federal Savings and Loan Association of Lancaster exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to evaluate 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 affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a useful measurement of an institution's financial fortitude. When it comes to safety and soundness, more capital is better.

Fairfield Federal Savings and Loan Association of Lancaster scored below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 12 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Fairfield Federal Savings and Loan Association of Lancaster's Tier 1 capital ratio was 21.15 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Fairfield Federal Savings and Loan Association of Lancaster held equity amounting to 10.51 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due loans.

A bank with a large number of these types of assets may eventually be forced 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 interest for the bank, diminishing earnings and elevating the risk of a failure in the future.

Fairfield Federal Savings and Loan Association of Lancaster came in below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

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, 1.05 percent of Fairfield Federal Savings and Loan Association of Lancaster'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 troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Fairfield Federal Savings and Loan Association of Lancaster's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

Fairfield Federal Savings and Loan Association of Lancaster scored 10 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for Fairfield Federal Savings and Loan Association of Lancaster was 4.22 percent, below the national average of 8.10 percent.

The bank earned net income of $1.1 million on total equity of $27.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.43 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.