Asset Quality Score
In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with extensive holdings of these types of assets could eventually be required to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.
On Bankrate's test of asset quality, Farmers Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.48 percent of Farmers Bank'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." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Farmers Bank's loan loss allowance in its most recent filings.