Safe and Sound

The Farmers State Bank of Blue Mound

Blue Mound, KS
5
Star Rating
The Farmers State Bank of Blue Mound is an FDIC-insured bank started in 1913 and currently based in Blue Mound, KS. The bank has equity of $7.7 million on $47.3 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 18 full-time employees in 3 offices in KS, the bank currently holds loans and leases worth $30.5 million, including real estate loans of $15.9 million. U.S. bank customers currently have $39.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers State Bank of Blue Mound exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial fortitude. It acts as a cushion against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is preferred.

The Farmers State Bank of Blue Mound scored above the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 24 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Farmers State Bank of Blue Mound's Tier 1 capital ratio was 22.30 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 weather financial downturns.

Overall, The Farmers State Bank of Blue Mound held equity amounting to 16.32 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having a large number of these kinds of assets could eventually force a bank to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and increasing the chances of a failure in the future.

The Farmers State Bank of Blue Mound scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.37 percent of The Farmers State Bank of Blue Mound'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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve 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 State Bank of Blue Mound's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

The Farmers State Bank of Blue Mound scored 14 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for The Farmers State Bank of Blue Mound was 6.42 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $480,000 on total equity of $7.7 million. The bank reported an annualized return on average assets, or ROA, of 1.06 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.