Safe and Sound

The Farmers and Merchants State Bank of Argonia

Argonia, KS
NR
Star Rating
Founded in 1901, The Farmers and Merchants State Bank of Argonia is an FDIC-insured bank headquartered in Argonia, KS. The bank holds equity of $984,000 on $34,199,000 in assets, according to June 30, 2017, regulatory filings.

With 16 full-time employees in 2 offices in KS, the bank holds loans and leases worth $27.2 million, including real estate loans of $17.2 million. U.S. bank customers currently have $29.6 million in deposits with the bank.

Overall, Bankrate did not have enough information on this institution to give it a star rating. Keep reading for a look at how the bank faired on the three key criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial fortitude. It works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.
On our test to measure capital adequacy, The Farmers and Merchants State Bank of Argonia received a score of 0 out of a possible 30 points, lower than the national average of 13.38.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The Farmers and Merchants State Bank of Argonia's Tier 1 capital ratio was 4.18 percent, less than the 6 percent level considered adequate by regulators, and lower than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, The Farmers and Merchants State Bank of Argonia held equity amounting to 2.88 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having lots of these types of assets suggests a bank could have 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 interest for the bank, pushing down earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, The Farmers and Merchants State Bank of Argonia scored 0 out of a possible 40 points, failing to reach the national average of 37.62 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 12.72 percent of The Farmers and Merchants State Bank of Argonia's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful 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 The Farmers and Merchants State Bank of Argonia's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

The Farmers and Merchants State Bank of Argonia scored 0 out of a possible 30 on Bankrate's earnings test, lower than the national average of 16.52.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The Farmers and Merchants State Bank of Argonia's most recent annualized quarterly return on equity was -152.33 percent, below the national average of 9.28 percent.

The bank earned net income of $-1.4 million on total equity of $984,000 for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of -7.92 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.