Safe and Sound

Farmers & Merchants Bank

Statesboro, GA
2
Star Rating
Started in 1948, Farmers & Merchants Bank is an FDIC-insured bank headquartered in Statesboro, GA. The bank holds equity of $18.1 million on $189.8 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 42 full-time employees in 3 offices in GA, the bank has amassed loans and leases worth $118.0 million, $94.0 million of which are for real estate. The bank currently holds $171.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Farmers & Merchants Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It works as a bulwark against losses and provides protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, Farmers & Merchants Bank received a score of 10 out of a possible 30 points, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers & Merchants Bank's Tier 1 capital ratio was 13.08 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 held equity amounting to 9.56 percent of its assets, which was lower than 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 loan loss reserves and overall capitalization.

A bank with a large number of these types of assets could eventually be required to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, Farmers & Merchants Bank scored 36 out of a possible 40 points, less than 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, 0.44 percent of Farmers & Merchants 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Farmers & Merchants Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's test of earnings, Farmers & Merchants Bank scored 0 out of a possible 30, coming in below the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Farmers & Merchants Bank's most recent annualized quarterly return on equity was -5.45 percent, below the national average of 8.10 percent.

The bank earned net income of $-1.1 million on total equity of $18.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of -0.57 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.