Safe and Sound

Farmers Bank & Trust

Atwood, KS
5
Star Rating
Farmers Bank & Trust is an Atwood, KS-based, FDIC-insured bank that opened its doors in 1914. As of December 31, 2017, the bank had equity of $9.7 million on assets of $101.4 million.

With 21 full-time employees in 3 offices in KS, the bank holds loans and leases worth $37.9 million, including real estate loans of $17.0 million. U.S. bank customers currently have $91.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers Bank & Trust exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors during times of financial trouble for the bank. 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 higher the capital, the better.

Farmers Bank & Trust scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Farmers Bank & Trust's Tier 1 capital ratio was 16.50 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Farmers Bank & Trust held equity amounting to 9.54 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

Having lots of these types of assets means a bank could eventually have to use capital to absorb losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the risk of a future failure.

Farmers Bank & Trust beat out the national average of 37.49 on Bankrate's asset quality test, 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 December 31, 2017, 0.87 percent of Farmers Bank & Trust'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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem 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 affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

Farmers Bank & Trust beat the national average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Farmers Bank & Trust was 11.36 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.1 million on total equity of $9.7 million. The bank reported an annualized return on average assets, or ROA, of 1.15 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.