Safe and Sound

The Farmers Bank of Liberty

Liberty, IL
4
Star Rating
Started in 1903, The Farmers Bank of Liberty is an FDIC-insured bank based in Liberty, IL. The bank holds equity of $10.8 million on $92.5 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $80.9 million on deposit at 4 offices in IL run by 28 full-time employees. With that footprint, the bank currently holds loans and leases worth $58.1 million, including $37.5 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers Bank of Liberty exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to score American banks.

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 resilience. It acts as a buffer against losses and provides protection for accountholders during times of financial trouble for the bank. When looking at safety and soundness, more capital is preferred.

The Farmers Bank of Liberty scored above the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Farmers Bank of Liberty's Tier 1 capital ratio was 17.69 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, The Farmers Bank of Liberty held equity amounting to 11.64 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

A bank with extensive holdings of these types of assets may eventually have to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

The Farmers Bank of Liberty fell below the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.78 percent of The Farmers Bank of Liberty'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Farmers Bank of Liberty's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand financial trouble. However, banks that are losing money have less ability to do those things.

The Farmers Bank of Liberty scored 18 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The Farmers Bank of Liberty was 8.97 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $929,000 on total equity of $10.8 million. The bank experienced an annualized return on average assets, or ROA, of 1.03 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.