Safe and Sound

First Farmers Bank and Trust Company

Converse, IN
4
Star Rating
First Farmers Bank and Trust Company is a Converse, IN-based, FDIC-insured bank dating back to 1932. Regulatory filings show the bank having equity of $177.3 million on $1.67 billion in assets, as of December 31, 2017.

Thanks to the efforts of 366 full-time employees in 35 offices in multiple states, the bank currently holds loans and leases worth $1.22 billion, including $640.0 million worth of real estate loans. The bank currently holds $1.34 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First Farmers Bank and Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for account holders during times of economic trouble for the bank. Therefore, a bank's level of capital is an important measurement of an institution's financial fortitude. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, First Farmers Bank and Trust Company received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Farmers Bank and Trust Company's Tier 1 capital ratio was 12.64 percent, above the 6 percent level considered adequate by regulators, but below 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, First Farmers Bank and Trust Company held equity amounting to 10.61 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with large numbers of these types of assets could eventually have to use capital to cover losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and elevating the chances of a future failure.

First Farmers Bank and Trust Company scored 36 out of a possible 40 points on Bankrate's asset quality test, below the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.46 percent of First Farmers Bank and Trust Company'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 problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First Farmers Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's earnings test, First Farmers Bank and Trust Company scored 22 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for First Farmers Bank and Trust Company was 12.73 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $21.6 million on total equity of $177.3 million. The bank reported an annualized return on average assets, or ROA, of 1.33 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.