Safe and Sound

Farmers-Merchants Bank & Trust Company

Breaux Bridge, LA
4
Star Rating
Farmers-Merchants Bank & Trust Company is an FDIC-insured bank started in 1932 and currently headquartered in Breaux Bridge, LA. The bank has equity of $39.8 million on $295.2 million in assets, according to December 31, 2017, regulatory filings.

With 93 full-time employees in 8 offices in LA, the bank has amassed loans and leases worth $222.6 million, including real estate loans of $189.0 million. U.S. bank customers currently have $248.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers-Merchants Bank & Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an an institution's financial resilience, capital is crucial. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Farmers-Merchants Bank & Trust Company scored 18 out of a possible 30 points, above the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Farmers-Merchants Bank & Trust Company's Tier 1 capital ratio was 13.70 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, Farmers-Merchants Bank & Trust Company held equity amounting to 13.49 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets suggests a bank may eventually have to use capital to cover losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

Farmers-Merchants Bank & Trust Company scored 32 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.49.

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, 2.94 percent of Farmers-Merchants Bank & Trust Company's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is 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-Merchants Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Farmers-Merchants Bank & Trust Company scored 18 out of a possible 30, better than the national average of 15.12.

One key measure of 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 & Trust Company was 8.51 percent, above the national average of 8.10 percent.

The bank recorded net income of $3.3 million on total equity of $39.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.14 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.