Safe and Sound

Wake Forest Federal Savings and Loan Association

Wake Forest, NC
5
Star Rating
Wake Forest Federal Savings and Loan Association is a Wake Forest, NC-based, FDIC-insured bank founded in 1922. The bank has equity of $23.2 million on $104.2 million in assets, according to December 31, 2017, regulatory filings.

With 8 full-time employees, the bank holds loans and leases worth $57.7 million, including real estate loans of $58.9 million. U.S. bank customers currently have $79.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Wake Forest Federal Savings and Loan Association exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is valuable. It acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

Wake Forest Federal Savings and Loan Association achieved a score of 30 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Wake Forest Federal Savings and Loan Association's Tier 1 capital ratio was 40.32 percent, exceeding the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, Wake Forest Federal Savings and Loan Association held equity amounting to 22.28 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

Having a large number of these types of assets could eventually force a bank to use capital to absorb losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a failure in the future.

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

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, none of Wake Forest Federal Savings and Loan Association'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." How large that reserve is 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 Wake Forest Federal Savings and Loan Association's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

Wake Forest Federal Savings and Loan Association scored 8 out of a possible 30 on Bankrate's earnings test, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. Wake Forest Federal Savings and Loan Association's most recent annualized quarterly return on equity was 3.26 percent, below the national average of 8.10 percent.

The bank recorded net income of $754,000 on total equity of $23.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.72 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.