Safe and Sound

Farmers and Merchants Bank of South Carolina

Holly Hill, SC
3
Star Rating
Farmers and Merchants Bank of South Carolina is an FDIC-insured bank started in 1912 and currently headquartered in Holly Hill, SC. Regulatory filings show the bank having equity of $42.1 million on $394.7 million in assets, as of December 31, 2017.

U.S. bank customers have $351.3 million on deposit at 8 offices in SC run by 76 full-time employees. With that footprint, the bank currently holds loans and leases worth $98.5 million, including $79.9 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Farmers and Merchants Bank of South Carolina exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is important. It works as a buffer against losses and as protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, more capital is preferred.

Farmers and Merchants Bank of South Carolina received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers and Merchants Bank of South Carolina's Tier 1 capital ratio was 38.60 percent, above the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Farmers and Merchants Bank of South Carolina held equity amounting to 10.67 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these types of assets could eventually require a bank to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and elevating the chances of a failure in the future.

Farmers and Merchants Bank of South Carolina scored 36 out of a possible 40 points on Bankrate's asset quality test, lower than the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 3.61 percent of Farmers and Merchants Bank of South Carolina'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Farmers and Merchants Bank of South Carolina'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, increasing its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

Farmers and Merchants Bank of South Carolina scored 6 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Farmers and Merchants Bank of South Carolina's most recent annualized quarterly return on equity was 2.91 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.2 million on total equity of $42.1 million. The bank had an annualized return on average assets, or ROA, of 0.37 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.