Safe and Sound

F&M Bank

West Point, NE
5
Star Rating
West Point, NE-based F&M Bank is an FDIC-insured bank started in 1931. As of December 31, 2017, the bank had equity of $27.2 million on assets of $289.3 million.

Thanks to the work of 63 full-time employees in 6 offices in multiple states, the bank has amassed loans and leases worth $212.4 million, $126.7 million of which are for real estate. The bank currently holds $256.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, F&M Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is crucial. It works as a cushion against losses and affords protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

On our test to measure capital adequacy, F&M Bank received a score of 10 out of a possible 30 points, failing to reach the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. F&M Bank's Tier 1 capital ratio was 11.03 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, F&M Bank held equity amounting to 9.38 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these kinds of assets means a bank may eventually have to use capital to cover losses, diminishing 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 failure in the future.

On Bankrate's test of asset quality, F&M Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of F&M 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 known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. F&M Bank's loan loss allowance was 266,600.00 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

F&M Bank scored 22 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. F&M Bank's most recent annualized quarterly return on equity was 13.20 percent, above the national average of 8.10 percent.

The bank reported net income of $3.5 million on total equity of $27.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.26 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.