Farmington Bank Financial Analysis

FarmingtonBank Financial Analysis


Objective:To analyze the suitability of Farmington Bank for investment of theemployees’ accumulated retirement funds.

Thesis: Company should consider investing the employees’ retirement fundsin the Banks stock since there are high chances that they will get areasonable return from the venture.

  1. Investment analysis is an important process that helps investors in selecting the most appropriate investment options.

  2. Farmington Bank is a financial institution that started from a humble beginning, but currently has the asset base of about $ 2.4 billion dollars (Farmington Bank, 2014).

  3. Both the financial, as well as the ratio analysis, indicate that Farmington Bank is a promising investment opportunity.

  1. Review of the main points

  1. Strategy updates

  1. The company has a long-term strategy to invest the employees’ retirement funds accumulated in the 401(k) plan.

  1. An overview of the analysis

  1. Financial statements

  1. The total revenue for Farmington Bank increased steadily from the financial year ended 2009 to 2013.

  2. The total net income increased between 2009 and 2010, decreased exponentially between 2010 and 2011, increased exponentially between 2011 and 2012, and then reduced slightly between 2012 and 2013 (Yahoo Finance, 2014).

  1. Financial ratios

  1. A decrease in the ROAA ratio indicates the bank used more assets to make revenue in 2013 than in 2012.

  2. An improvement in the ROAE ratio from 1.49 to 1.57 suggests that the shareholders will earn more for their investment in Farmington Bank (Yahoo Finance, 2014).

  1. Recommendations

  1. The retirement funds should be invested in the Farmington stock since it has a healthy financial status and prospects for future growth.

  1. Conclusion

  1. The analysis of the financial statements, as well as the ratio analysis, indicates that Farmington is a viable investment opportunity.

FarmingtonBank Financial Analysis

Introductionand company overview

Investmentanalysis is a significant process that helps investors determines themost suitable investment alternative. This paper addresses thefinancial analysis of Farmington Bank with a focus on the analysis ofthe financial statements and ratio analysis. Farmington Bank is afinancial institution 1851 with an initial deposit of $ 88.70(Farmington Bank, 2014). Initial customers of the bank were theresidents of the Farmington Valley who deposited their hard-earnedsavings in the bank. The trust that the residents has in the bankgave it an opportunity to grow and increase its market coverage inother geographical areas. Currently, the Farmington Bank has an assetbase of about $ 2.4 billion (Farmington Bank, 2014). Both the nationand the financial statement analysis indicate that Farmington Bank isa suitable investment alternative.


Theinvestment analysis documented in this paper is intended to determinethe suitability of Farmington Bank for investment. However,Farmington Bank is one out of several other companies beingconsidered for investment. The strategy of the company is to decidewhich of the companies considered for analysis is the mostappropriate for investment. The most appropriate alternative will beincluded in the company 401(k) plan. This is a long-term investmentstrategy in which the company employees will invest part of theirretirement funds accumulated in the 401(k) plan in the stocks of theselected companies. By doing this, employees will have theopportunity to earn out of the retirement funds.

Anoverview of the analysis


Therevenue for the Farmington Bank grew steadily for a period of 5financial years, starting from 2009 to 2013 as shown in Table 1.

Table1: Changes in total revenue for a period of five years

Source:Yahoo Finance (2014)

Thenet income increased from 2009 to 2010 and decreased drasticallybetween 2010 and 2011. The income the increased exponentially from2011 to 2012 and then stagnated for the financial year 2012 2013 asshown in Table 2.

Table2: Changes in net income

Source:Yahoo Finance (2014)

Totalassets increased steadily for a period of five years as shown inTable 3. This indicates that the value of the bank was increasingwith time.

Table3: Changes in total assets

Source:Yahoo Finance (2014)


Thereturn on average assets for Farmington Bank deteriorated for thefinancial years 2012 and 2013. The ratio (ROAA) was determined usingthe formula

ROAA= net income / Total assets

Theratios were 0.22 and 0.19 for the financial periods 2012 and 2013respectively. Since a lower rate of ROAA indicates a higherasset-intensity, a decrease in the value of ROAA ratio for the banksuggests that the bank will require more assets to make a given unitof revenue in 2013 than in 2012.

TheReturn on average equity ratio improved from the year 2012 to 2013.ROAE ratio was 1.49 and 1.57 for 2012 and 2013 respectively. Thismeans that the ratio for 2012 was below the optimum limit of 15-20 %.

Theefficiency ratio reduced from 89.46 to 89.28 in 2012 and 2013respectively. This shows that Farmington Bank used its assets moreeffectively in 2013 than in 2012.

Recommendationsand reasons for the recommendation

Thereare five factors indicating that Farmington should be included inthe401 (k) plan. First, an increase in ROAE from 1.49 to 1.57 in 2012and 2013 respectively indicates that the capacity of the bank toutilize its equity base improved, which is favorable to investors.This suggests that the shareholder value will continue increasingwith time. Secondly, the efficiency ratio changed from 89.46 in 2012to 89.28 in 2013, implying that Farmington Bank utilized fewer assetsto generate revenue in 2013 compared to 2012. This suggests that thebank efficiency has been increasing, which is favorable to investors.Third, the bank’s total revenue has been increasing steadily for aperiod of five years. This indicates that the bank’s capacity togenerate revenue has will increase in the unforeseeable future.Lastly, although the net income reduced significantly in 2010 and2011, the bank is indicated its capacity to salvage the situation.This is indicated by an exponential increase in the net income fromthe year 2011 to 2012 and a slight change between 2012 and 2013. Thefavorable changes in the net income coupled with a positiveefficiency ratio indicate that the profitability of the bank is morelikely to increase than decreasing in the future. Therefore, thecompany should consider investing in Farmington Bank because there ishope for a significant improvement in performance in the future.


Theanalysis of the financial statements and ratios of Farmington Bankindicates that the bank is an appropriate investment option. Trendsshow that the bank’s revenue and total assets have been growingsteadily. Although its net income had decreased exponentially between2010 and 2011, the bank managed to recover its income growth record.Apart from the ROAA ratio, other nations (including ROAE andefficiency ratio) considered in the present investment analysisindicate that Farmington Bank is a promising investment opportunity.The company should, therefore, consider the investment the employees’retirement funds in the Banks stock since there are highprobabilities that they will get a reasonable return from theventure.


FarmingtonBank (2014). Our nearest branch. FarmingtonBank.Retrieved December 16, 2014, from

YahooFinance (2014). First Connecticut Bancorp, Incorporation (FBNK).YahooFinance.Retrieved December 16, 2014, from