Safe and Sound

Farmers and Merchants Trust Company of Chambersburg

Chambersburg, PA
5
Star Rating
Farmers and Merchants Trust Company of Chambersburg is an FDIC-insured bank started in 1906 and currently headquartered in Chambersburg, PA. As of June 30, 2017, the bank held equity of $122.0 million on $1,135,229,000 in assets.

U.S. bank customers have $1.01 billion on deposit at 25 offices in PA run by 249 full-time employees. With that footprint, the bank currently holds loans and leases worth $890.9 million, including real estate loans of $611.8 million.

Overall, Bankrate believes that, as of June 30, 2017, Farmers and Merchants Trust Company of Chambersburg exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank faired on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is crucial. It works as a cushion against losses and as protection for accountholders during times of financial instability for the bank. When it comes to safety and soundness, the more capital, the better.
On our test to measure the adequacy of a bank's capital, Farmers and Merchants Trust Company of Chambersburg received a score of 12 out of a possible 30 points, less than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers and Merchants Trust Company of Chambersburg's Tier 1 capital ratio was 15.46 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Farmers and Merchants Trust Company of Chambersburg held equity amounting to 10.75 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

A bank with a large number of these kinds of assets may eventually be required 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, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Farmers and Merchants Trust Company of Chambersburg scored 40 out of a possible 40 points, better than the national average of 37.62 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.35 percent of Farmers and Merchants Trust Company of Chambersburg's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Farmers and Merchants Trust Company of Chambersburg's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Farmers and Merchants Trust Company of Chambersburg scored 20 out of a possible 30, exceeding the national average of 16.52.

One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Farmers and Merchants Trust Company of Chambersburg's most recent annualized quarterly return on equity was 11.45 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $6.8 million on total equity of $122.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.20 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.