Safe and Sound

The Farmers Bank of Osborne

Osborne, KS
5
Star Rating
The Farmers Bank of Osborne is an Osborne, KS-based, FDIC-insured bank that opened its doors in 1901. As of December 31, 2017, the bank held equity of $7.2 million on assets of $63.4 million.

Thanks to the efforts of 15 full-time employees in 2 offices in KS, the bank holds loans and leases worth $37.8 million, $22.4 million of which are for real estate. U.S. bank customers currently have $55.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers Bank of Osborne exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is experiencing financial trouble. It follows then that a bank's level of capital is a useful measurement of a bank's financial resilience. When it comes to safety and soundness, more capital is better.

The Farmers Bank of Osborne racked up 14 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Farmers Bank of Osborne's Tier 1 capital ratio was 15.02 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, The Farmers Bank of Osborne held equity amounting to 11.35 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 troubled assets, such as past-due loans.

Having extensive holdings of these kinds of assets may eventually require a bank to use capital to absorb losses, cutting down on its buffer 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 failure in the future.

The Farmers Bank of Osborne scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.09 percent of The Farmers Bank of Osborne'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. The Farmers Bank of Osborne's loan loss allowance was 1,533.33 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money are less able to do those things.

The Farmers Bank of Osborne scored 20 out of a possible 30 on Bankrate's test of earnings, above the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for The Farmers Bank of Osborne was 11.40 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $797,000 on total equity of $7.2 million. The bank had an annualized return on average assets, or ROA, of 1.28 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.