Safe and Sound

Farmers Bank & Trust

Great Bend, KS
5
Star Rating
Started in 1907, Farmers Bank & Trust is an FDIC-insured bank headquartered in Great Bend, KS. As of June 30, 2017, the bank had equity of $137.3 million on $803,417,000 in assets.

U.S. bank customers have $537.9 million on deposit at 9 offices in KS run by 97 full-time employees. With that footprint, the bank holds loans and leases worth $284.1 million, including $236.6 million worth of real estate loans.

Overall, Bankrate believes that, as of June 30, 2017, Farmers Bank & Trust exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial fortitude. It acts as a bulwark against losses and provides protection for depositors when a bank is experiencing economic instability. When it comes to safety and soundness, the higher the capital, the better.
On our test to measure the adequacy of a bank's capital, Farmers Bank & Trust achieved a score of 26 out of a possible 30 points, beating out the national average of 13.38.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Farmers Bank & Trust's Tier 1 capital ratio was 25.64 percent, higher than the 6 percent level considered adequate by regulators, and higher than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, Farmers Bank & Trust held equity amounting to 17.09 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these kinds of assets could eventually be forced to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a failure in the future.

Farmers Bank & Trust did better than the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.51 percent of Farmers Bank & Trust'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 1.04 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the how large that reserve is to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Farmers Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's earnings test, Farmers Bank & Trust scored 20 out of a possible 30, exceeding the national average of 16.52.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. Farmers Bank & Trust's most recent annualized quarterly return on equity was 11.97 percent, above the national average of 9.28 percent.

The bank reported net income of $7.9 million on total equity of $137.3 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 1.97 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.