Safe and Sound

The First Farmers National Bank of Waurika

Waurika, OK
5
Star Rating
Waurika, OK-based The First Farmers National Bank of Waurika is an FDIC-insured bank founded in 1906. Regulatory filings show the bank having equity of $8.9 million on $45.0 million in assets, as of December 31, 2017.

Thanks to the efforts of 13 full-time employees, the bank has amassed loans and leases worth $17.2 million, including real estate loans of $4.5 million. U.S. bank customers currently have $36.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First Farmers National Bank of Waurika 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 major criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial resilience. It acts as a buffer against losses and provides protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

The First Farmers National Bank of Waurika beat out the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 30 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The First Farmers National Bank of Waurika's Tier 1 capital ratio was 46.71 percent, exceeding the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, The First Farmers National Bank of Waurika held equity amounting to 19.67 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these types of assets suggests a bank may have to use capital to absorb losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

The First Farmers National Bank of Waurika scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

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, 0.36 percent of The First Farmers National Bank of Waurika'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 to handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. The First Farmers National Bank of Waurika's loan loss allowance was 1,589.23 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

The First Farmers National Bank of Waurika scored 12 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The First Farmers National Bank of Waurika was 5.29 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $473,000 on total equity of $8.9 million. The bank had an annualized return on average assets, or ROA, of 1.05 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.