Safe and Sound

Farmers State Bank of West Concord

West Concord, MN
5
Star Rating
Farmers State Bank of West Concord is an FDIC-insured bank founded in 1930 and currently based in West Concord, MN. Regulatory filings show the bank having equity of $5.3 million on $50.0 million in assets, as of December 31, 2017.

U.S. bank customers have $44.7 million on deposit at 2 offices in MN run by 12 full-time employees. With that footprint, the bank currently holds loans and leases worth $36.8 million, $28.0 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Farmers State Bank of West Concord exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is key. It acts as a buffer against losses and as protection for accountholders during periods of economic trouble for the bank. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Farmers State Bank of West Concord received a score of 12 out of a possible 30 points, falling short of the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Farmers State Bank of West Concord's Tier 1 capital ratio was 15.96 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Farmers State Bank of West Concord held equity amounting to 10.54 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having a large number of these types of assets suggests a bank may have to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and increasing the chances of a future failure.

Farmers State Bank of West Concord exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.05 percent of Farmers State Bank of West Concord's loans were noncurrent, meaning 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 to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Farmers State Bank of West Concord's loan loss allowance was 2,780.00 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

Farmers State Bank of West Concord exceeded the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for Farmers State Bank of West Concord was 8.20 percent, above the national average of 8.10 percent.

The bank reported net income of $426,000 on total equity of $5.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.86 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.