Safe and Sound

The Farmers State Bank of Turton

Turton, SD
5
Star Rating
The Farmers State Bank of Turton is an FDIC-insured bank started in 1915 and currently based in Turton, SD. Regulatory filings show the bank having equity of $3.6 million on $30.2 million in assets, as of December 31, 2017.

Thanks to the work of 5 full-time employees, the bank has amassed loans and leases worth $16.3 million, including $4.5 million worth of real estate loans. U.S. bank customers currently have $26.5 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial fortitude. It acts as a bulwark against losses and as protection for depositors during periods of financial trouble for the bank. From a safety and soundness perspective, more capital is preferred.

The Farmers State Bank of Turton exceeded the national average of 13.13 points on our test to measure capital adequacy, scoring 14 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. The Farmers State Bank of Turton's Tier 1 capital ratio was 19.65 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, The Farmers State Bank of Turton held equity amounting to 11.85 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

Having lots of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a failure in the future.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.61 percent of The Farmers State Bank of Turton'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 to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The Farmers State Bank of Turton'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, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

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

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for The Farmers State Bank of Turton was 11.74 percent, above the national average of 8.10 percent.

The bank earned net income of $401,000 on total equity of $3.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.37 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.