Safe and Sound

Farmers and Merchants State Bank, Bloomfield, Nebraska

Bloomfield, NE
4
Star Rating
Bloomfield, NE-based Farmers and Merchants State Bank, Bloomfield, Nebraska is an FDIC-insured bank founded in 1895. As of December 31, 2017, the bank had equity of $13.3 million on assets of $129.8 million.

With 24 full-time employees in 6 offices in multiple states, the bank has amassed loans and leases worth $88.1 million, including real estate loans of $14.6 million. U.S. bank customers currently have $114.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers and Merchants State Bank, Bloomfield, Nebraska exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders during periods of financial trouble for the bank. It follows then that when it comes to measuring an an institution's financial fortitude, capital is valuable. When it comes to safety and soundness, the more capital, the better.

Farmers and Merchants State Bank, Bloomfield, Nebraska finished below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 12 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Farmers and Merchants State Bank, Bloomfield, Nebraska's Tier 1 capital ratio was 12.74 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, Farmers and Merchants State Bank, Bloomfield, Nebraska held equity amounting to 10.28 percent of its assets, which was lower than the national average of 12.03 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 problem assets, such as unpaid mortgages.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Farmers and Merchants State Bank, Bloomfield, Nebraska scored 40 out of a possible 40 points, beating the national average of 37.49 points.

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, 0.07 percent of Farmers and Merchants State Bank, Bloomfield, Nebraska'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 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Farmers and Merchants State Bank, Bloomfield, Nebraska's loan loss allowance was 1,767.19 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's earnings test, Farmers and Merchants State Bank, Bloomfield, Nebraska scored 16 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Farmers and Merchants State Bank, Bloomfield, Nebraska was 7.64 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.0 million on total equity of $13.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.82 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.