Safe and Sound

Farmers State Bank of Hartland

Hartland, MN
5
Star Rating
Farmers State Bank of Hartland is a Hartland, MN-based, FDIC-insured bank founded in 1912. The bank holds equity of $16.0 million on assets of $139.4 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $115.1 million on deposit at 3 offices in MN run by 24 full-time employees. With that footprint, the bank currently holds loans and leases worth $106.2 million, $59.8 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Farmers State Bank of Hartland exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of 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?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an a bank's financial fortitude, capital is valuable. When it comes to safety and soundness, the more capital, the better.

Farmers State Bank of Hartland received a score of 12 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Farmers State Bank of Hartland's Tier 1 capital ratio was 12.83 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 weather financial downturns.

Overall, Farmers State Bank of Hartland held equity amounting to 11.50 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

Having a large number of these kinds of assets may eventually require a bank to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Farmers State Bank of Hartland did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.49 percent of Farmers State Bank of Hartland'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 to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Farmers State Bank of Hartland's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Farmers State Bank of Hartland scored 22 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Farmers State Bank of Hartland was 13.03 percent, above the national average of 8.10 percent.

The bank earned net income of $2.0 million on total equity of $16.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.49 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.