Safe and Sound

McFarland State Bank

Mc Farland, WI
5
Star Rating
McFarland State Bank is a Mc Farland, WI-based, FDIC-insured bank started in 1905. The bank has equity of $51.2 million on assets of $483.5 million, according to December 31, 2017, regulatory filings.

With 80 full-time employees in 6 offices in WI, the bank holds loans and leases worth $413.2 million, including real estate loans of $391.1 million. U.S. bank customers currently have $358.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, McFarland State Bank 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 key criteria Bankrate used to score U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of an institution's financial strength. From a safety and soundness perspective, more capital is preferred.

McFarland State Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. McFarland State Bank's Tier 1 capital ratio was 11.59 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, McFarland State Bank held equity amounting to 10.59 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and increasing the risk of a failure in the future.

McFarland State Bank exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 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, 0.25 percent of McFarland State 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 troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on McFarland 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 buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

McFarland State Bank scored 28 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for McFarland State Bank was 20.98 percent, above the national average of 8.10 percent.

The bank earned net income of $10.2 million on total equity of $51.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 2.22 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.