Safe and Sound

Farmers State Bank of Trimont

Trimont, MN
3
Star Rating
Trimont, MN-based Farmers State Bank of Trimont is an FDIC-insured bank started in 1912. Regulatory filings show the bank having equity of $9.3 million on $60.7 million in assets, as of December 31, 2017.

Thanks to the efforts of 11 full-time employees in 2 offices in MN, the bank has amassed loans and leases worth $27.3 million, including real estate loans of $9.3 million. U.S. bank customers currently have $50.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers State Bank of Trimont exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to score U.S. banks.

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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 fortitude, capital is valuable. It acts as a cushion against losses and as protection for accountholders when a bank is experiencing financial trouble. From a safety and soundness perspective, more capital is better.

On our test to measure the adequacy of a bank's capital, Farmers State Bank of Trimont scored 22 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Farmers State Bank of Trimont's Tier 1 capital ratio was 21.32 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Farmers State Bank of Trimont held equity amounting to 15.30 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

A bank with large numbers of these types of assets may eventually be forced to use capital to cover losses, cutting down on 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 interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Farmers State Bank of Trimont scored 12 out of a possible 40 points, falling short of the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.80 percent of Farmers State Bank of Trimont's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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 . Comparing how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Farmers State Bank of Trimont's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand financial trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Farmers State Bank of Trimont underperformed the average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Farmers State Bank of Trimont was 5.51 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $510,000 on total equity of $9.3 million. The bank reported an annualized return on average assets, or ROA, of 0.84 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.