Safe and Sound

The Farmers State Bank of Waupaca

Waupaca, WI
5
Star Rating
The Farmers State Bank of Waupaca is an FDIC-insured bank founded in 1911 and currently headquartered in Waupaca, WI. The bank has equity of $25.1 million on assets of $192.3 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 41 full-time employees in 4 offices in WI, the bank holds loans and leases worth $109.1 million, including real estate loans of $86.6 million. The bank currently holds $164.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers State Bank of Waupaca exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to grade 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 a bank's financial fortitude. It acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is preferred.

The Farmers State Bank of Waupaca racked up 18 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The Farmers State Bank of Waupaca's Tier 1 capital ratio was 17.16 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, The Farmers State Bank of Waupaca held equity amounting to 13.08 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets may eventually be required to use capital to cover losses, diminishing its equity buffer. 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, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, The Farmers State Bank of Waupaca scored 40 out of a possible 40 points, beating the national average of 37.49 points.

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, 0.32 percent of The Farmers State Bank of Waupaca'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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful 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 Waupaca's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand economic shocks. Losses, on the other hand, take away from a bank's ability to do those things.

The Farmers State Bank of Waupaca did above-average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The Farmers State Bank of Waupaca's most recent annualized quarterly return on equity was 8.32 percent, above the national average of 8.10 percent.

The bank recorded net income of $2.2 million on total equity of $25.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.17 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.