Safe and Sound

Four Oaks Bank & Trust Company

Four Oaks, NC
4
Star Rating
Four Oaks, NC-based Four Oaks Bank & Trust Company is an FDIC-insured bank founded in 1912. As of June 30, 2017, the bank had equity of $91.2 million on $736,893,000 in assets.

U.S. bank customers have $562.3 million on deposit at 12 offices in NC run by 164 full-time employees. With that footprint, the bank currently holds loans and leases worth $490.6 million, including real estate loans of $467.2 million.

Overall, Bankrate believes that, as of June 30, 2017, Four Oaks Bank & Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to score U.S. 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 as protection for accountholders when a bank is experiencing economic instability. It follows then that a bank's level of capital is a useful measurement of a bank's financial fortitude. When looking at safety and soundness, the higher the capital, the better.
Four Oaks Bank & Trust Company beat out the national average of 13.38 points on our test to measure capital adequacy, receiving a score of 16 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. Four Oaks Bank & Trust Company's Tier 1 capital ratio was 14.73 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Four Oaks Bank & Trust Company held equity amounting to 12.38 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by problem assets, such as past-due mortgages.

Having large numbers of these types of assets may eventually require a bank to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, Four Oaks Bank & Trust Company scored 40 out of a possible 40 points, better than the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of June 30, 2017, 0.80 percent of Four Oaks Bank & Trust Company's loans were noncurrent -- in other words, 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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Four Oaks Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

Four Oaks Bank & Trust Company scored 14 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 16.52.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Four Oaks Bank & Trust Company was 6.52 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $2.9 million on total equity of $91.2 million. The bank experienced an annualized return on average assets, or ROA, of 0.80 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.