Safe and Sound

Farmers State Bank

Lincolnton, GA
5
Star Rating
Farmers State Bank is a Lincolnton, GA-based, FDIC-insured bank that opened its doors in 1911. As of December 31, 2017, the bank held equity of $19.5 million on $127.0 million in assets.

Thanks to the efforts of 38 full-time employees in 3 offices in GA, the bank holds loans and leases worth $71.5 million, $57.8 million of which are for real estate. The bank currently holds $107.3 million in deposits from U.S. customers.

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

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It acts as a cushion against losses and affords protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is better.

Farmers State Bank racked up 22 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Farmers State Bank's Tier 1 capital ratio was 24.55 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Farmers State Bank held equity amounting to 15.33 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets may eventually be required to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, reducing earnings and elevating the chances of a future failure.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.81 percent of Farmers State Bank'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a helpful 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

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Farmers State Bank scored 20 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The most recent annualized quarterly return on equity for Farmers State Bank was 10.54 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $2.0 million on total equity of $19.5 million. The bank had an annualized return on average assets, or ROA, of 1.60 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.