Safe and Sound

Farmers State Bank, Allen, Oklahoma

Allen, OK
5
Star Rating
Founded in 1922, Farmers State Bank, Allen, Oklahoma is an FDIC-insured bank headquartered in Allen, OK. Regulatory filings show the bank having equity of $5.3 million on $43.6 million in assets, as of December 31, 2017.

U.S. bank customers have $37.6 million on deposit at 2 offices in OK run by 13 full-time employees. With that footprint, the bank currently holds loans and leases worth $32.7 million, $14.2 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Farmers State Bank, Allen, Oklahoma 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 important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors during times of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is crucial. From a safety and soundness perspective, the higher the capital, the better.

Farmers State Bank, Allen, Oklahoma racked up 16 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.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Farmers State Bank, Allen, Oklahoma's Tier 1 capital ratio was 15.15 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, Farmers State Bank, Allen, Oklahoma held equity amounting to 12.20 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

A bank with a large number of these types of assets may eventually be forced to use capital to cover losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the risk of a failure in the future.

Farmers State Bank, Allen, Oklahoma scored 36 out of a possible 40 points on Bankrate's test of asset quality, coming in below the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.74 percent of Farmers State Bank, Allen, Oklahoma'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a widely used 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 State Bank, Allen, Oklahoma'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 use them to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, Farmers State Bank, Allen, Oklahoma scored 20 out of a possible 30, exceeding the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Farmers State Bank, Allen, Oklahoma was 10.04 percent, above the national average of 8.10 percent.

The bank reported net income of $533,000 on total equity of $5.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.21 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.