Safe and Sound

The Farmers Bank of Willards

Willards, MD
4
Star Rating
Willards, MD-based The Farmers Bank of Willards is an FDIC-insured bank founded in 1925. Regulatory filings show the bank having equity of $38.3 million on $348.8 million in assets, as of December 31, 2017.

With 82 full-time employees in 9 offices in multiple states, the bank currently holds loans and leases worth $309.1 million, including real estate loans of $277.3 million. U.S. bank customers currently have $281.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers Bank of Willards exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders during times of economic instability for the bank. Therefore, a bank's level of capital is a useful measurement of an institution's financial fortitude. From a safety and soundness perspective, the higher the capital, the better.

The Farmers Bank of Willards received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. The Farmers Bank of Willards's Tier 1 capital ratio was 13.56 percent, higher than the 6 percent level regulators consider adequate, 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 difficulties.

Overall, The Farmers Bank of Willards held equity amounting to 10.97 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and elevating the chances of a future failure.

The Farmers Bank of Willards scored 32 out of a possible 40 points on Bankrate's asset quality test, failing to reach the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.04 percent of The Farmers Bank of Willards'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 . 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 at-risk loans. Unfortunately, the FDIC did not provide information on The Farmers Bank of Willards's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

The Farmers Bank of Willards beat the national average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for The Farmers Bank of Willards was 8.23 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.1 million on total equity of $38.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.90 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.