Safe and Sound

Farmers State Bank of Munith

Munith, MI
4
Star Rating
Farmers State Bank of Munith is a Munith, MI-based, FDIC-insured bank that opened its doors in 1922. Regulatory filings show the bank having equity of $7.3 million on assets of $72.2 million, as of December 31, 2017.

U.S. bank customers have $64.6 million on deposit at 3 offices in MI run by 26 full-time employees. With that footprint, the bank has amassed loans and leases worth $47.3 million, including real estate loans of $40.4 million.

Overall, Bankrate believes that, as of December 31, 2017, Farmers State Bank of Munith exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is essential. It acts as a cushion against losses and affords protection for depositors when a bank is experiencing financial trouble. From a safety and soundness perspective, more capital is preferred.

Farmers State Bank of Munith received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Farmers State Bank of Munith's Tier 1 capital ratio was 18.49 percent, exceeding the 6 percent level regulators consider adequate, 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 Munith held equity amounting to 10.10 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these kinds of assets suggests a bank may have to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

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

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, 0.72 percent of Farmers State Bank of Munith'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 reserve's size to the total amount of problematic 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 Munith's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

Farmers State Bank of Munith scored 18 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Farmers State Bank of Munith's most recent annualized quarterly return on equity was 8.28 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $592,000 on total equity of $7.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.83 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.