Safe and Sound

Farmers and Drovers Bank

Council Grove, KS
5
Star Rating
Council Grove, KS-based Farmers and Drovers Bank is an FDIC-insured bank started in 1882. The bank has equity of $46.7 million on assets of $181.2 million, according to December 31, 2017, regulatory filings.

With 27 full-time employees in 3 offices in KS, the bank holds loans and leases worth $88.4 million, including real estate loans of $53.0 million. U.S. bank customers currently have $112.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers and Drovers Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders when a bank is experiencing financial trouble. It follows then that a bank's level of capital is an essential measurement of a bank's financial resilience. When looking at safety and soundness, the more capital, the better.

Farmers and Drovers Bank scored 30 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 way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers and Drovers Bank's Tier 1 capital ratio was 45.93 percent, higher than the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, Farmers and Drovers Bank held equity amounting to 25.79 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these types of assets may eventually force a bank 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 thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

Farmers and Drovers Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

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, 0.54 percent of Farmers and Drovers 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 problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Farmers and Drovers Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank better able to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's test of earnings, Farmers and Drovers Bank scored 8 out of a possible 30, falling short of the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for Farmers and Drovers Bank was 3.77 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.8 million on total equity of $46.7 million. The bank had an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, and equal to 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.