Safe and Sound

Farmers Savings Bank

Colesburg, IA
5
Star Rating
Farmers Savings Bank is a Colesburg, IA-based, FDIC-insured bank dating back to 1907. The bank holds equity of $24.0 million on $192.5 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $168.1 million on deposit at 5 offices in IA run by 33 full-time employees. With that footprint, the bank has amassed loans and leases worth $136.2 million, including $56.3 million worth of real estate loans.

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 did on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is important. It works as a bulwark against losses and as protection for accountholders when a bank is experiencing financial instability. When looking at safety and soundness, the more capital, the better.

Farmers Savings Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 16 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. Farmers Savings Bank's Tier 1 capital ratio was 14.74 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, Farmers Savings Bank held equity amounting to 12.46 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due 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, shrinking its buffer of equity. 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 Savings Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, better than 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, 0.26 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 known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic 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 earnings performance affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Farmers Savings Bank scored 18 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Farmers Savings Bank was 9.19 percent, above the national average of 8.10 percent.

The bank earned net income of $2.2 million on total equity of $24.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.19 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.