Safe and Sound

Fayetteville Bank

Fayetteville, TX
5
Star Rating
Started in 1917, Fayetteville Bank is an FDIC-insured bank based in Fayetteville, TX. Regulatory filings show the bank having equity of $55.2 million on assets of $490.8 million, as of December 31, 2017.

Thanks to the efforts of 33 full-time employees in 3 offices in TX, the bank holds loans and leases worth $72.4 million, $44.8 million of which are for real estate. The bank currently holds $432.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Fayetteville Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

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

On our test to measure capital adequacy, Fayetteville Bank scored 14 out of a possible 30 points, beating out the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Fayetteville Bank's Tier 1 capital ratio was 28.09 percent, higher than the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, Fayetteville Bank held equity amounting to 11.25 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these types of assets suggests a bank may eventually have to use capital to absorb losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and increasing the risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, none of Fayetteville 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Fayetteville 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, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

Fayetteville Bank scored 28 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. Fayetteville Bank's most recent annualized quarterly return on equity was 22.69 percent, above the national average of 8.10 percent.

The bank reported net income of $10.9 million on total equity of $55.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 2.28 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.