Safe and Sound

Farmers and Merchants Trust Company of Chambersburg

Chambersburg, PA
3
Star Rating
Started in 1906, Farmers and Merchants Trust Company of Chambersburg is an FDIC-insured bank based in Chambersburg, PA. Regulatory filings show the bank having equity of $114.3 million on assets of $1.18 billion, as of December 31, 2017.

With 255 full-time employees in 25 offices in PA, the bank holds loans and leases worth $932.4 million, including real estate loans of $647.6 million. U.S. bank customers currently have $1.05 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers and Merchants Trust Company of Chambersburg exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial resilience, capital is crucial. From a safety and soundness perspective, the higher the capital, the better.

Farmers and Merchants Trust Company of Chambersburg fell short of the national average of 13.13 on our test to measure capital adequacy, achieving a score of 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Farmers and Merchants Trust Company of Chambersburg's Tier 1 capital ratio was 13.93 percent, higher than the 6 percent level considered adequate by regulators, but below 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 Merchants Trust Company of Chambersburg held equity amounting to 9.68 percent of its assets, which was lower than 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 problem assets, such as past-due mortgages.

A bank with a large number of these kinds of assets may eventually be required to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the chances of a future failure.

Farmers and Merchants Trust Company of Chambersburg beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.28 percent of Farmers and Merchants Trust Company of Chambersburg'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 size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Farmers and Merchants Trust Company of Chambersburg's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money are less able to do those things.

Farmers and Merchants Trust Company of Chambersburg fell short of the national average on Bankrate's test of earnings, achieving a score of 6 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Farmers and Merchants Trust Company of Chambersburg was 2.47 percent, below the national average of 8.10 percent.

The bank earned net income of $2.9 million on total equity of $114.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.26 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.