Safe and Sound

Farmers & Traders Bank of Campton

Campton, KY
4
Star Rating
Campton, KY-based Farmers & Traders Bank of Campton is an FDIC-insured bank started in 1902. The bank has equity of $5.4 million on assets of $48.1 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 12 full-time employees, the bank holds loans and leases worth $22.8 million, including $19.4 million worth of real estate loans. U.S. bank customers currently have $38.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers & Traders Bank of Campton exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial strength. It works as a buffer against losses and as protection for accountholders when a bank is experiencing financial trouble. When it comes to safety and soundness, the more capital, the better.

Farmers & Traders Bank of Campton received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers & Traders Bank of Campton's Tier 1 capital ratio was 15.22 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Farmers & Traders Bank of Campton held equity amounting to 11.20 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 past-due mortgages.

Having lots of these kinds of assets could eventually require a bank 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, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Farmers & Traders Bank of Campton scored 36 out of a possible 40 points, failing to reach the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.25 percent of Farmers & Traders Bank of Campton's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve 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 & Traders Bank of Campton's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

Farmers & Traders Bank of Campton did above-average on Bankrate's earnings test, achieving a score of 16 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Farmers & Traders Bank of Campton's most recent annualized quarterly return on equity was 7.10 percent, below the national average of 8.10 percent.

The bank reported net income of $379,000 on total equity of $5.4 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.78 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.