Safe and Sound

Farmers Bank

Ault, CO
5
Star Rating
Farmers Bank is an FDIC-insured bank founded in 2001 and currently based in Ault, CO. The bank has equity of $31.1 million on $236.7 million in assets, according to December 31, 2017, regulatory filings.

With 30 full-time employees in 2 offices in CO, the bank has amassed loans and leases worth $186.0 million, including real estate loans of $133.0 million. U.S. bank customers currently have $205.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to evaluate American 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 stability, capital is important. It acts as a buffer against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Farmers Bank racked up 18 out of a possible 30 points, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers Bank's Tier 1 capital ratio was 16.09 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Farmers Bank held equity amounting to 13.13 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these kinds of assets suggests a bank may have to use capital to absorb losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

Farmers Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, failing to reach the national average of 37.49.

A handy 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 Farmers 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Farmers Bank's loan loss allowance was 92,300.00 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand financial trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, Farmers Bank scored 26 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. Farmers Bank's most recent annualized quarterly return on equity was 16.53 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $5.0 million on total equity of $31.1 million. The bank had an annualized return on average assets, or ROA, of 2.20 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.