Safe and Sound

The Farmers Bank of Milton

Milton, KY
4
Star Rating
The Farmers Bank of Milton is an FDIC-insured bank founded in 1902 and currently based in Milton, KY. The bank holds equity of $35.1 million on $238.2 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 49 full-time employees in 5 offices in multiple states, the bank holds loans and leases worth $140.1 million, $119.5 million of which are for real estate. The bank currently holds $202.7 million in deposits from U.S. customers.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial resilience. It works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is preferred.

The Farmers Bank of Milton achieved a score of 20 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Farmers Bank of Milton's Tier 1 capital ratio was 23.13 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, The Farmers Bank of Milton held equity amounting to 14.74 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, decreasing 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, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, The Farmers Bank of Milton scored 32 out of a possible 40 points, coming in below 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, 4.08 percent of The Farmers Bank of Milton'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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The Farmers Bank of Milton's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

The Farmers Bank of Milton fell behind the national average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for The Farmers Bank of Milton was 5.73 percent, below the national average of 8.10 percent.

The bank earned net income of $2.0 million on total equity of $35.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.84 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.