Safe and Sound

Farmers & Stockmens Bank

Clayton, NM
5
Star Rating
Founded in 1920, Farmers & Stockmens Bank is an FDIC-insured bank headquartered in Clayton, NM. The bank has equity of $24.7 million on $211.8 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 57 full-time employees in 4 offices in multiple states, the bank currently holds loans and leases worth $161.2 million, including real estate loans of $124.1 million. U.S. bank customers currently have $172.8 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial strength. It acts as a buffer against losses and provides protection for accountholders when a bank is experiencing economic trouble. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Farmers & Stockmens Bank received a score of 12 out of a possible 30 points, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers & Stockmens Bank's Tier 1 capital ratio was 11.53 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Farmers & Stockmens Bank held equity amounting to 11.67 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets could eventually have to use capital to absorb losses, shrinking 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, resulting in depressed earnings and potentially more risk of a future failure.

Farmers & Stockmens Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.87 percent of Farmers & Stockmens Bank'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 deal with problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Farmers & Stockmens 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, giving a boost to its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Farmers & Stockmens Bank scored 26 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Farmers & Stockmens Bank was 18.93 percent, above the national average of 8.10 percent.

The bank recorded net income of $4.4 million on total equity of $24.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 2.12 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.