Safe and Sound

Farmers & Merchants Bank

Miamisburg, OH
5
Star Rating
Farmers & Merchants Bank is an FDIC-insured bank started in 1923 and currently headquartered in Miamisburg, OH. As of June 30, 2017, the bank had equity of $13.8 million on assets of $137.5 million.

U.S. bank customers have $118.1 million on deposit at 4 offices in OH run by 28 full-time employees. With that footprint, the bank currently holds loans and leases worth $97.7 million, including $80.0 million worth of real estate loans.

Overall, Bankrate believes that, as of June 30, 2017, Farmers & Merchants Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is key. It works as a bulwark against losses and provides protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.
On our test to measure capital adequacy, Farmers & Merchants Bank received a score of 12 out of a possible 30 points, falling short of the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers & Merchants Bank's Tier 1 capital ratio was 14.62 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Farmers & Merchants Bank held equity amounting to 10.03 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

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

Having large numbers of these types of assets suggests a bank could eventually have to use capital to cover losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

Farmers & Merchants Bank did better than the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 0.06 percent of Farmers & Merchants Bank'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 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the that reserve's size to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Farmers & Merchants Bank's loan loss allowance was 2,710.71 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

Farmers & Merchants Bank scored 20 out of a possible 30 on Bankrate's test of earnings, better than the national average of 16.52.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Farmers & Merchants Bank was 10.81 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $722,000 on total equity of $13.8 million. The bank experienced an annualized return on average assets, or ROA, of 1.07 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below 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.