Safe and Sound

The Farmers State Bank

Dwight, KS
4
Star Rating
The Farmers State Bank is an FDIC-insured bank started in 1921 and currently based in Dwight, KS. As of December 31, 2017, the bank had equity of $1.9 million on $16.2 million in assets.

With 6 full-time employees, the bank currently holds loans and leases worth $8.9 million, including real estate loans of $3.0 million. U.S. bank customers currently have $13.8 million in deposits with the bank.

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. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is essential. It works as a bulwark against losses and affords protection for depositors during periods of economic trouble for the bank. 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 scored 14 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The Farmers State Bank's Tier 1 capital ratio was 21.29 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, The Farmers State Bank held equity amounting to 11.76 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

A bank with a large number of these types of assets may eventually be required to use capital to cover 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 money, resulting in diminished earnings and potentially more risk of a failure in the future.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of The Farmers State Bank'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 . Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem 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. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

The Farmers State Bank did below-average on Bankrate's earnings test, achieving a score of 2 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for The Farmers State Bank was 0.21 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $4,000 on total equity of $1.9 million. The bank reported an annualized return on average assets, or ROA, of 0.02 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.