Safe and Sound

Farmers & Mechanics Bank

Galesburg, IL
4
Star Rating
Farmers & Mechanics Bank is an FDIC-insured bank founded in 1869 and currently based in Galesburg, IL. As of December 31, 2017, the bank held equity of $45.4 million on assets of $361.2 million.

With 67 full-time employees in 5 offices in IL, the bank has amassed loans and leases worth $203.2 million, including real estate loans of $152.1 million. U.S. bank customers currently have $311.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers & Mechanics Bank 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 score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is important. It works as a cushion against losses and affords protection for depositors during periods of economic instability for the bank. 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 & Mechanics Bank received a score of 10 out of a possible 30 points, 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 & Mechanics Bank's Tier 1 capital ratio was 16.00 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, Farmers & Mechanics Bank held equity amounting to 12.57 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 problem assets, such as unpaid loans.

Having extensive holdings of these types of assets means a bank could have to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and increasing the chances of a failure in the future.

On Bankrate's test of asset quality, Farmers & Mechanics Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.25 percent of Farmers & Mechanics Bank'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 deal with problem 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 handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Farmers & Mechanics Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Farmers & Mechanics Bank scored 18 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Farmers & Mechanics Bank was 9.93 percent, above the national average of 8.10 percent.

The bank earned net income of $4.3 million on total equity of $45.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.23 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.