Safe and Sound

The Farmers State Bank of Oakley, Kansas

Oakley, KS
5
Star Rating
The Farmers State Bank of Oakley, Kansas is an Oakley, KS-based, FDIC-insured bank dating back to 1907. Regulatory filings show the bank having equity of $20.2 million on $143.6 million in assets, as of December 31, 2017.

Thanks to the efforts of 14 full-time employees, the bank has amassed loans and leases worth $97.2 million, including $46.4 million worth of real estate loans. U.S. bank customers currently have $98.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers State Bank of Oakley, Kansas exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial resilience. It works as a cushion against losses and provides protection for accountholders when a bank is experiencing economic instability. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, The Farmers State Bank of Oakley, Kansas racked up 20 out of a possible 30 points, beating the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The Farmers State Bank of Oakley, Kansas's Tier 1 capital ratio was 16.14 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, The Farmers State Bank of Oakley, Kansas held equity amounting to 14.08 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these types of assets could eventually have 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, resulting in depressed earnings and potentially more risk of a failure in the future.

The Farmers State Bank of Oakley, Kansas scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out 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, 0.12 percent of The Farmers State Bank of Oakley, Kansas'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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Farmers State Bank of Oakley, Kansas's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's earnings test, The Farmers State Bank of Oakley, Kansas scored 18 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. The Farmers State Bank of Oakley, Kansas's most recent annualized quarterly return on equity was 9.16 percent, above the national average of 8.10 percent.

The bank earned net income of $1.8 million on total equity of $20.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.31 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.