Safe and Sound

Farmers Trust and Savings Bank

Buffalo Center, IA
5
Star Rating
Started in 1914, Farmers Trust and Savings Bank is an FDIC-insured bank based in Buffalo Center, IA. As of December 31, 2017, the bank held equity of $31.4 million on assets of $256.3 million.

Thanks to the work of 39 full-time employees in 5 offices in multiple states, the bank holds loans and leases worth $213.1 million, $87.5 million of which are for real estate. U.S. bank customers currently have $212.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers Trust and Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a key measurement of an institution's financial fortitude. From a safety and soundness perspective, the higher the capital, the better.

Farmers Trust and Savings Bank achieved a score of 14 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Farmers Trust and Savings Bank's Tier 1 capital ratio was 14.28 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, Farmers Trust and Savings Bank held equity amounting to 12.26 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

Having lots of these kinds of assets may eventually force a bank to use capital to cover losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

Farmers Trust and Savings Bank scored above 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 widely used indicator of asset quality.As of December 31, 2017, 0.62 percent of Farmers Trust and Savings 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Farmers Trust and Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Farmers Trust and Savings Bank scored 24 out of a possible 30, beating the national average of 15.12.

One key 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 Trust and Savings Bank was 15.69 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $4.5 million on total equity of $31.4 million. The bank experienced an annualized return on average assets, or ROA, of 1.76 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.