Safe and Sound

Farmers National Bank

Phillipsburg, KS
5
Star Rating
Founded in 1921, Farmers National Bank is an FDIC-insured bank based in Phillipsburg, KS. Regulatory filings show the bank having equity of $21.9 million on assets of $133.4 million, as of December 31, 2017.

With 25 full-time employees in 5 offices in KS, the bank currently holds loans and leases worth $95.7 million, including real estate loans of $41.7 million. U.S. bank customers currently have $106.6 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is experiencing economic trouble. It follows then that when it comes to measuring an a bank's financial stability, capital is key. From a safety and soundness perspective, the more capital, the better.

Farmers National Bank exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 24 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Farmers National Bank's Tier 1 capital ratio was 20.68 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Farmers National Bank held equity amounting to 16.43 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 past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these types of assets may eventually force a bank to use capital to absorb losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

Farmers National Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.85 percent of Farmers National 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 troubled 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 troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Farmers National Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's test of earnings, Farmers National Bank scored 10 out of a possible 30, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Farmers National Bank's most recent annualized quarterly return on equity was 4.08 percent, below the national average of 8.10 percent.

The bank earned net income of $879,000 on total equity of $21.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.68 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.