Safe and Sound

The Farmers State Bank

Quinton, OK
4
Star Rating
The Farmers State Bank is an FDIC-insured bank started in 1908 and currently based in Quinton, OK. Regulatory filings show the bank having equity of $7.9 million on assets of $100.8 million, as of December 31, 2017.

U.S. bank customers have $90.8 million on deposit at 3 offices in OK run by 34 full-time employees. With that footprint, the bank currently holds loans and leases worth $54.1 million, including $32.3 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 look at how the bank did on the three major criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial stability, capital is useful. From a safety and soundness perspective, the more capital, the better.

The Farmers State Bank scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 6 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Farmers State Bank's Tier 1 capital ratio was 13.39 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, The Farmers State Bank held equity amounting to 7.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due mortgages.

A bank with extensive holdings of these types of assets could eventually be forced to use capital to absorb losses, cutting down on 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, decreasing earnings and elevating the risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.23 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic loans can be a helpful 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

A bank's earnings performance has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

The Farmers State Bank scored 18 out of a possible 30 on Bankrate's earnings test, beating 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, essentially) by total equity. The Farmers State Bank's most recent annualized quarterly return on equity was 8.70 percent, above the national average of 8.10 percent.

The bank earned net income of $653,000 on total equity of $7.9 million for the twelve months ended December 31, 2017. The bank reported 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.