Safe and Sound

First Federal Savings and Loan Association

Aberdeen, MS
5
Star Rating
First Federal Savings and Loan Association is an Aberdeen, MS-based, FDIC-insured bank that opened its doors in 1936. Regulatory filings show the bank having equity of $7.0 million on assets of $36.3 million, as of December 31, 2017.

With 4 full-time employees, the bank holds loans and leases worth $24.8 million, including real estate loans of $24.1 million. U.S. bank customers currently have $29.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Federal Savings and Loan Association exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors when a bank is experiencing financial instability. Therefore, when it comes to measuring an an institution's financial resilience, capital is key. When it comes to safety and soundness, more capital is preferred.

First Federal Savings and Loan Association did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 30 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. First Federal Savings and Loan Association's Tier 1 capital ratio was 46.42 percent, above the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, First Federal Savings and Loan Association held equity amounting to 19.22 percent of its assets, which exceeded 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 loan loss reserves and overall capitalization.

Having lots of these types of assets means a bank may have to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.

First Federal Savings and Loan Association exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.30 percent of First Federal Savings and Loan Association'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 problem assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First Federal Savings and Loan Association's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand financial trouble. Losses, on the other hand, reduce a bank's ability to do those things.

First Federal Savings and Loan Association received below-average marks on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. First Federal Savings and Loan Association's most recent annualized quarterly return on equity was 2.26 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $156,000 on total equity of $7.0 million. The bank had an annualized return on average assets, or ROA, of 0.46 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.