Safe and Sound

Farmers Bank of Lincoln

Lincoln, MO
5
Star Rating
Farmers Bank of Lincoln is an FDIC-insured bank founded in 1890 and currently based in Lincoln, MO. Regulatory filings show the bank having equity of $12.7 million on $116.1 million in assets, as of December 31, 2017.

With 24 full-time employees in 2 offices in MO, the bank holds loans and leases worth $84.7 million, including real estate loans of $75.0 million. U.S. bank customers currently have $96.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers Bank of Lincoln exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is key. It works as a cushion against losses and provides protection for accountholders during times of economic instability for the bank. When it comes to safety and soundness, the more capital, the better.

Farmers Bank of Lincoln received a score of 12 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Farmers Bank of Lincoln's Tier 1 capital ratio was 17.67 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, Farmers Bank of Lincoln held equity amounting to 10.92 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

Having a large number of these kinds of assets means a bank could eventually have to use capital to cover losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

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

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, 0.02 percent of Farmers Bank of Lincoln'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 . Comparing the reserve's size to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Farmers Bank of Lincoln's loan loss allowance was 5,190.00 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

Farmers Bank of Lincoln scored 24 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. Farmers Bank of Lincoln's most recent annualized quarterly return on equity was 15.39 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.9 million on total equity of $12.7 million. The bank experienced an annualized return on average assets, or ROA, of 1.65 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.