Safe and Sound

Farmers Bank of Northern Missouri

Unionville, MO
5
Star Rating
Farmers Bank of Northern Missouri is an FDIC-insured bank founded in 1901 and currently headquartered in Unionville, MO. As of December 31, 2017, the bank held equity of $44.0 million on $381.4 million in assets.

Thanks to the work of 83 full-time employees in 8 offices in multiple states, the bank holds loans and leases worth $224.1 million, including real estate loans of $132.9 million. U.S. bank customers currently have $327.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers Bank of Northern Missouri exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial fortitude. It acts as a buffer against losses and as protection for depositors during periods of financial trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Farmers Bank of Northern Missouri received a score of 12 out of a possible 30 points, lower than the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Farmers Bank of Northern Missouri's Tier 1 capital ratio was 15.29 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, Farmers Bank of Northern Missouri held equity amounting to 11.55 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due mortgages.

A bank with a large number of these kinds of assets could eventually be required to use capital to absorb losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the chances of a failure in the future.

On Bankrate's test of asset quality, Farmers Bank of Northern Missouri scored 40 out of a possible 40 points, better than the national average of 37.49 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, 0.84 percent of Farmers Bank of Northern 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful 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 Farmers Bank of Northern Missouri's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, Farmers Bank of Northern Missouri scored 18 out of a possible 30, exceeding the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Farmers Bank of Northern Missouri was 8.67 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.8 million on total equity of $44.0 million. The bank had an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, and equal to 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.