Safe and Sound

Farmers and Mechanics Federal Savings Bank

Bloomfield, IN
4
Star Rating
Farmers and Mechanics Federal Savings Bank is an FDIC-insured bank started in 1892 and currently based in Bloomfield, IN. As of December 31, 2017, the bank had equity of $12.5 million on $79.7 million in assets.

U.S. bank customers have $67.1 million on deposit at 2 offices in IN run by 11 full-time employees. With that footprint, the bank has amassed loans and leases worth $29.8 million, including real estate loans of $29.9 million.

Overall, Bankrate believes that, as of December 31, 2017, Farmers and Mechanics Federal Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a crucial measurement of a bank's financial resilience. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Farmers and Mechanics Federal Savings Bank achieved a score of 22 out of a possible 30 points, beating the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Farmers and Mechanics Federal Savings Bank's Tier 1 capital ratio was 44.69 percent, exceeding the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Farmers and Mechanics Federal Savings Bank held equity amounting to 15.66 percent of its assets, which exceeded 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 mortgages.

Having lots of these types of assets suggests a bank may eventually have to use capital to absorb losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and increasing the risk of a failure in the future.

Farmers and Mechanics Federal Savings Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.55 percent of Farmers and Mechanics Federal Savings Bank'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 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Farmers and Mechanics Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, boosting 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.

On Bankrate's earnings test, Farmers and Mechanics Federal Savings Bank scored 4 out of a possible 30, below the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Farmers and Mechanics Federal Savings Bank's most recent annualized quarterly return on equity was 1.71 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $214,000 on total equity of $12.5 million. The bank reported an annualized return on average assets, or ROA, of 0.28 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.