Safe and Sound

The Farmers Bank

Carnegie, OK
3
Star Rating
Carnegie, OK-based The Farmers Bank is an FDIC-insured bank founded in 1905. Regulatory filings show the bank having equity of $6.8 million on assets of $71.4 million, as of December 31, 2017.

Thanks to the efforts of 15 full-time employees, the bank holds loans and leases worth $59.8 million, including $44.1 million worth of real estate loans. The bank currently holds $59.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders during periods of economic trouble for the bank. Therefore, when it comes to measuring an a bank's financial resilience, capital is valuable. From a safety and soundness perspective, more capital is better.

The Farmers Bank came in below the national average of 13.13 on our test to measure capital adequacy, racking up 10 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. The Farmers Bank's Tier 1 capital ratio was 12.49 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, The Farmers Bank held equity amounting to 9.53 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these kinds of assets could eventually be required to use capital to cover losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and elevating the chances of a failure in the future.

The Farmers Bank finished below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.20 percent of The Farmers Bank's loans were noncurrent -- in other words, 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 the reserve's size to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Farmers Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

The Farmers Bank did below-average on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The Farmers Bank's most recent annualized quarterly return on equity was 2.21 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $119,000 on total equity of $6.8 million. The bank had an annualized return on average assets, or ROA, of 0.23 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.