Safe and Sound

Farmers & Merchants Bank of Craig County

New Castle, VA
5
Star Rating
Farmers & Merchants Bank of Craig County is a New Castle, VA-based, FDIC-insured bank dating back to 1917. Regulatory filings show the bank having equity of $11.3 million on assets of $60.7 million, as of December 31, 2017.

With 15 full-time employees, the bank currently holds loans and leases worth $31.6 million, including real estate loans of $27.7 million. U.S. bank customers currently have $49.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers & Merchants Bank of Craig County exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is important. It works as a bulwark against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is better.

Farmers & Merchants Bank of Craig County did better than the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 28 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Farmers & Merchants Bank of Craig County's Tier 1 capital ratio was 44.06 percent, higher than 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 challenges.

Overall, Farmers & Merchants Bank of Craig County held equity amounting to 18.58 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled 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 force a bank to use capital to absorb losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

Farmers & Merchants Bank of Craig County scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out the national average of 37.49.

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, none of Farmers & Merchants Bank of Craig County'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." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Farmers & Merchants Bank of Craig County's loan loss allowance was 48,700.00 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

Farmers & Merchants Bank of Craig County did below-average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Farmers & Merchants Bank of Craig County was 5.64 percent, below the national average of 8.10 percent.

The bank recorded net income of $622,000 on total equity of $11.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.06 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.