Safe and Sound

Kentucky Farmers Bank Corporation

Catlettsburg, KY
5
Star Rating
Kentucky Farmers Bank Corporation is a Catlettsburg, KY-based, FDIC-insured bank started in 1931. As of December 31, 2017, the bank held equity of $42.1 million on assets of $179.7 million.

Thanks to the work of 57 full-time employees in 3 offices in KY, the bank has amassed loans and leases worth $71.5 million, $52.7 million of which are for real estate. The bank currently holds $137.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Kentucky Farmers Bank Corporation 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 grade U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is experiencing economic instability. It follows then that when it comes to measuring an a bank's financial fortitude, capital is key. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Kentucky Farmers Bank Corporation achieved a score of 30 out of a possible 30 points, better than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Kentucky Farmers Bank Corporation's Tier 1 capital ratio was 30.21 percent, exceeding the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, Kentucky Farmers Bank Corporation held equity amounting to 23.40 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate 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 a large number of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Kentucky Farmers Bank Corporation scored 40 out of a possible 40 points, beating 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, 0.70 percent of Kentucky Farmers Bank Corporation'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 1.01 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing 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 Kentucky Farmers Bank Corporation's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial trouble. However, banks that are losing money have less ability to do those things.

Kentucky Farmers Bank Corporation received below-average marks on Bankrate's earnings test, achieving a score of 12 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Kentucky Farmers Bank Corporation was 5.28 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.2 million on total equity of $42.1 million. The bank experienced an annualized return on average assets, or ROA, of 1.23 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.