Safe and Sound

The Farmers State Bank

New Madison, OH
4
Star Rating
Started in 1919, The Farmers State Bank is an FDIC-insured bank based in New Madison, OH. As of December 31, 2017, the bank held equity of $19.0 million on $168.7 million in assets.

U.S. bank customers have $138.5 million on deposit at 8 offices in multiple states run by 57 full-time employees. With that footprint, the bank has amassed loans and leases worth $121.7 million, including $97.7 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers State Bank 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 key criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is an important measurement of a bank's financial resilience. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The Farmers State Bank achieved a score of 14 out of a possible 30 points, exceeding the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. The Farmers State Bank's Tier 1 capital ratio was 16.63 percent, exceeding 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 headwinds.

Overall, The Farmers State Bank held equity amounting to 11.28 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 troubled assets, such as unpaid loans.

A bank with a large number of these kinds of assets may eventually be forced to use capital to cover losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and increasing the chances of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.13 percent of The Farmers State Bank'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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Farmers State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

The Farmers State Bank did below-average on Bankrate's earnings test, achieving a score of 14 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The Farmers State Bank's most recent annualized quarterly return on equity was 7.00 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.3 million on total equity of $19.0 million. The bank had an annualized return on average assets, or ROA, of 0.80 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.