Safe and Sound

Traders & Farmers Bank

Haleyville, AL
4
Star Rating
Started in 1906, Traders & Farmers Bank is an FDIC-insured bank headquartered in Haleyville, AL. The bank holds equity of $52.8 million on $365.3 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 106 full-time employees in 7 offices in AL, the bank has amassed loans and leases worth $166.6 million, including real estate loans of $119.2 million. U.S. bank customers currently have $289.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Traders & Farmers Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders when a bank is experiencing financial instability. Therefore, when it comes to measuring an an institution's financial strength, capital is important. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, Traders & Farmers Bank achieved a score of 20 out of a possible 30 points, better than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Traders & Farmers Bank's Tier 1 capital ratio was 27.31 percent, exceeding the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Traders & Farmers Bank held equity amounting to 14.46 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these kinds of assets means a bank may eventually have to use capital to cover 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 thus aren't earning money, decreasing earnings and increasing the chances of a failure in the future.

Traders & Farmers Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, lower than the national average of 37.49.

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, 0.95 percent of Traders & Farmers 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 to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Traders & Farmers Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, Traders & Farmers Bank scored 10 out of a possible 30, failing to reach the national average of 15.12.

One key measure of 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 Traders & Farmers Bank was 4.94 percent, below the national average of 8.10 percent.

The bank reported net income of $2.6 million on total equity of $52.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.70 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.