Safe and Sound

Farmers State Bank

Dodge, NE
4
Star Rating
Farmers State Bank is a Dodge, NE-based, FDIC-insured bank founded in 1889. The bank holds equity of $23.0 million on $242.5 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $207.8 million on deposit at 7 offices in NE run by 39 full-time employees. With that footprint, the bank holds loans and leases worth $181.4 million, $75.0 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Farmers State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is useful. It works as a bulwark against losses and as protection for accountholders during times of economic instability for the bank. When it comes to safety and soundness, the more capital, the better.

Farmers State Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Farmers State Bank's Tier 1 capital ratio was 10.89 percent, higher than 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 financial difficulties.

Overall, Farmers State Bank held equity amounting to 9.47 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

A bank with extensive holdings of these kinds of assets could eventually have to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.13 percent of Farmers State Bank'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 maintain 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 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's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

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

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Farmers State Bank was 10.83 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.2 million on total equity of $23.0 million. The bank reported an annualized return on average assets, or ROA, of 1.11 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.