Safe and Sound

Farmers Bank and Trust Company

Princeton, KY
5
Star Rating
Princeton, KY-based Farmers Bank and Trust Company is an FDIC-insured bank started in 1900. The bank holds equity of $18.5 million on assets of $128.1 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $105.0 million on deposit at 2 offices in KY run by 34 full-time employees. With that footprint, the bank holds loans and leases worth $95.4 million, including real estate loans of $88.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Farmers Bank and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial resilience. It acts as a buffer against losses and as protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, the higher the capital, the better.

Farmers Bank and Trust Company scored 20 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Farmers Bank and Trust Company's Tier 1 capital ratio was 19.22 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, Farmers Bank and Trust Company held equity amounting to 14.43 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually have to use capital to cover losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and increasing the chances of a future failure.

Farmers Bank and Trust Company beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.06 percent of Farmers Bank and Trust Company'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 troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Farmers Bank and Trust Company's loan loss allowance was 2,641.82 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

Farmers Bank and Trust Company outperformed the average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Farmers Bank and Trust Company's most recent annualized quarterly return on equity was 11.16 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.1 million on total equity of $18.5 million. The bank had an annualized return on average assets, or ROA, of 1.69 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.