Safe and Sound

Farmers Bank of Lohman, Missouri

Lohman, MO
5
Star Rating
Farmers Bank of Lohman, Missouri is a Lohman, MO-based, FDIC-insured bank dating back to 1909. As of December 31, 2017, the bank had equity of $9.6 million on $67.3 million in assets.

With 10 full-time employees in 2 offices in MO, the bank has amassed loans and leases worth $15.6 million, including real estate loans of $9.9 million. U.S. bank customers currently have $57.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers Bank of Lohman, Missouri exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to score American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders when a bank is experiencing economic trouble. Therefore, a bank's level of capital is an essential measurement of an institution's financial fortitude. When it comes to safety and soundness, more capital is preferred.

On our test to measure capital adequacy, Farmers Bank of Lohman, Missouri scored 20 out of a possible 30 points, beating the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Farmers Bank of Lohman, Missouri's Tier 1 capital ratio was 33.17 percent, above the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Farmers Bank of Lohman, Missouri held equity amounting to 14.24 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due mortgages.

Having a large number of these kinds of assets may eventually require a bank to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and increasing the chances of a future failure.

Farmers Bank of Lohman, Missouri scored above 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 useful indicator of asset quality.As of December 31, 2017, none of Farmers Bank of Lohman, Missouri'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 deal with problem assets known as an "allowance for loan and lease losses." 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 at-risk loans. Unfortunately, the FDIC did not provide information on Farmers Bank of Lohman, Missouri's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Farmers Bank of Lohman, Missouri scored 10 out of a possible 30, below the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Farmers Bank of Lohman, Missouri was 4.65 percent, below the national average of 8.10 percent.

The bank recorded net income of $444,000 on total equity of $9.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.65 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.