Safe and Sound

Farmers & Merchants Bank

Tomah, WI
4
Star Rating
Started in 1911, Farmers & Merchants Bank is an FDIC-insured bank headquartered in Tomah, WI. The bank holds equity of $22.8 million on assets of $204.8 million, according to June 30, 2017, regulatory filings.

Thanks to the work of 44 full-time employees in 2 offices in WI, the bank currently holds loans and leases worth $135.0 million, including real estate loans of $102.4 million. U.S. bank customers currently have $145.8 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Farmers & Merchants Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank faired on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is crucial. It works as a buffer against losses and affords protection for depositors when a bank is experiencing economic trouble. When looking at safety and soundness, the more capital, the better.
Farmers & Merchants Bank did better than the national average of 13.38 points on our test to measure the adequacy of a bank's capital, scoring 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Farmers & Merchants Bank's Tier 1 capital ratio was 14.15 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather economic difficulties.

Overall, Farmers & Merchants Bank held equity amounting to 11.12 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 reserves set aside to cover loan losses, as well as overall capitalization could be affected by problem assets, such as unpaid mortgages.

A bank with extensive holdings of these types of assets may eventually have to use capital to cover 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 interest for the bank, decreasing earnings and increasing the chances of a failure in the future.

Farmers & Merchants Bank scored below the national average of 37.62 on Bankrate's asset quality test, racking up 36 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, 1.92 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 above the national average of 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Farmers & Merchants Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

Farmers & Merchants Bank scored 10 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 16.52.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Farmers & Merchants Bank's most recent annualized quarterly return on equity was 4.99 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $555,000 on total equity of $22.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.55 percent, below the 1 percent deemed satisfactory in accordance with industry standards and 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.