Safe and Sound

The Farmers State Bank of Westmoreland

Westmoreland, KS
4
Star Rating
Westmoreland, KS-based The Farmers State Bank of Westmoreland is an FDIC-insured bank started in 1898. As of December 31, 2017, the bank had equity of $25.1 million on $173.1 million in assets.

Thanks to the efforts of 34 full-time employees in 3 offices in KS, the bank has amassed loans and leases worth $116.0 million, including real estate loans of $72.8 million. U.S. bank customers currently have $147.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers State Bank of Westmoreland exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is important. It acts as a bulwark against losses and as protection for accountholders during periods of financial trouble for the bank. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, The Farmers State Bank of Westmoreland racked up 20 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Farmers State Bank of Westmoreland's Tier 1 capital ratio was 13.97 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, The Farmers State Bank of Westmoreland held equity amounting to 14.49 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets could eventually have to use capital to absorb losses, reducing its buffer of equity. 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, decreasing earnings and elevating the chances of a failure in the future.

On Bankrate's asset quality test, The Farmers State Bank of Westmoreland scored 36 out of a possible 40 points, failing to reach the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.48 percent of The Farmers State Bank of Westmoreland's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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." Comparing the reserve's size to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Farmers State Bank of Westmoreland's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

The Farmers State Bank of Westmoreland scored 10 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The Farmers State Bank of Westmoreland's most recent annualized quarterly return on equity was 4.42 percent, below the national average of 8.10 percent.

The bank earned net income of $1.1 million on total equity of $25.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.66 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.