Safe and Sound

The Bank of Fayette County

Piperton, TN
4
Star Rating
Started in 1905, The Bank of Fayette County is an FDIC-insured bank headquartered in Piperton, TN. As of December 31, 2017, the bank had equity of $49.1 million on assets of $551.8 million.

U.S. bank customers have $452.2 million on deposit at 10 offices in TN run by 121 full-time employees. With that footprint, the bank holds loans and leases worth $462.4 million, including real estate loans of $385.3 million.

Overall, Bankrate believes that, as of December 31, 2017, The Bank of Fayette County exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It acts as a buffer against losses and as protection for depositors during periods of economic trouble for the bank. From a safety and soundness perspective, more capital is better.

The Bank of Fayette County fell short of the national average of 13.13 on our test to measure capital adequacy, scoring 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The Bank of Fayette County's Tier 1 capital ratio was 11.66 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, The Bank of Fayette County held equity amounting to 8.90 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets could eventually force 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, resulting in reduced earnings and potentially more risk of a future failure.

The Bank of Fayette County fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.41 percent of The Bank of Fayette County'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 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Bank of Fayette County's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

The Bank of Fayette County scored 20 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

One key 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 The Bank of Fayette County was 11.70 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $5.1 million on total equity of $49.1 million. The bank had an annualized return on average assets, or ROA, of 0.98 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.