Safe and Sound

The Farmers Bank, Frankfort, Indiana

Frankfort, IN
4
Star Rating
The Farmers Bank, Frankfort, Indiana is a Frankfort, IN-based, FDIC-insured bank founded in 1876. The bank has equity of $55.7 million on assets of $540.7 million, according to December 31, 2017, regulatory filings.

With 120 full-time employees in 9 offices in IN, the bank has amassed loans and leases worth $379.9 million, including real estate loans of $299.1 million. U.S. bank customers currently have $427.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers Bank, Frankfort, Indiana exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial strength, capital is key. From a safety and soundness perspective, the higher the capital, the better.

The Farmers Bank, Frankfort, Indiana fell short of the national average of 13.13 on our test to measure capital adequacy, racking up 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Farmers Bank, Frankfort, Indiana's Tier 1 capital ratio was 11.79 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, The Farmers Bank, Frankfort, Indiana held equity amounting to 10.30 percent of its assets, which was lower than 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 could eventually require a bank to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and elevating the chances of a future failure.

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

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, 1.86 percent of The Farmers Bank, Frankfort, Indiana's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The Farmers Bank, Frankfort, Indiana's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand economic trouble. Losses, on the other hand, lessen a bank's ability to do those things.

The Farmers Bank, Frankfort, Indiana scored 20 out of a possible 30 on Bankrate's test of earnings, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one widely used measure of a bank's earnings. The Farmers Bank, Frankfort, Indiana's most recent annualized quarterly return on equity was 10.63 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $5.7 million on total equity of $55.7 million. The bank reported an annualized return on average assets, or ROA, of 1.08 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.