Safe and Sound

Farmers Savings Bank

Mineral Point, WI
5
Star Rating
Mineral Point, WI-based Farmers Savings Bank is an FDIC-insured bank founded in 1917. The bank has equity of $22.7 million on $288.0 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $264.0 million on deposit at 6 offices in WI run by 49 full-time employees. With that footprint, the bank holds loans and leases worth $167.6 million, including real estate loans of $100.5 million.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is useful. It acts as a cushion against losses and as protection for accountholders during periods of financial instability for the bank. When it comes to safety and soundness, the more capital, the better.

Farmers Savings Bank received a score of 6 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers Savings Bank's Tier 1 capital ratio was 13.51 percent, exceeding 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 stand up to economic difficulties.

Overall, Farmers Savings Bank held equity amounting to 7.87 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these types of assets could eventually require a bank 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 money, resulting in depressed earnings and potentially more risk of a future failure.

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

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, 0.23 percent of Farmers Savings 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 handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful 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 Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand financial shocks. However, banks that are losing money are less able to do those things.

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

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Farmers Savings Bank's most recent annualized quarterly return on equity was 18.96 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $4.6 million on total equity of $22.7 million. The bank had an annualized return on average assets, or ROA, of 1.64 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.