Safe and Sound

Farmers Building and Savings Bank

Rochester, PA
5
Star Rating
Farmers Building and Savings Bank is a Rochester, PA-based, FDIC-insured bank that opened its doors in 1894. As of December 31, 2017, the bank had equity of $19.3 million on assets of $94.3 million.

Thanks to the efforts of 6 full-time employees, the bank has amassed loans and leases worth $42.6 million, including $42.9 million worth of real estate loans. The bank currently holds $74.0 million in deposits from U.S. customers.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial resilience. It acts as a cushion against losses and as protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, more capital is preferred.

Farmers Building and Savings Bank achieved a score of 30 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Farmers Building and Savings Bank's Tier 1 capital ratio was 52.95 percent, exceeding the 6 percent level considered adequate by regulators, 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 economic headwinds.

Overall, Farmers Building and Savings Bank held equity amounting to 20.42 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these types of assets means a bank could eventually have to use capital to absorb losses, diminishing its equity buffer. 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, resulting in diminished earnings and potentially more risk of a future failure.

Farmers Building and Savings Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.49.

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, 4.23 percent of Farmers Building and Savings Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Farmers Building and Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money are less able to do those things.

Farmers Building and Savings Bank received below-average marks on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Farmers Building and Savings Bank's most recent annualized quarterly return on equity was 4.98 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $938,000 on total equity of $19.3 million. The bank reported 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.