Safe and Sound

Farmers & Merchants State Bank of New York Mills, Incorporated

New York Mills, MN
5
Star Rating
New York Mills, MN-based Farmers & Merchants State Bank of New York Mills, Incorporated is an FDIC-insured bank started in 1916. The bank has equity of $8.9 million on assets of $69.0 million, according to December 31, 2017, regulatory filings.

With 13 full-time employees, the bank has amassed loans and leases worth $33.1 million, including real estate loans of $22.7 million. U.S. bank customers currently have $55.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers & Merchants State Bank of New York Mills, Incorporated exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for depositors when a bank is experiencing financial instability. Therefore, when it comes to measuring an an institution's financial fortitude, capital is valuable. When it comes to safety and soundness, more capital is preferred.

Farmers & Merchants State Bank of New York Mills, Incorporated scored 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers & Merchants State Bank of New York Mills, Incorporated's Tier 1 capital ratio was 23.42 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Farmers & Merchants State Bank of New York Mills, Incorporated held equity amounting to 12.93 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets means a bank could eventually have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

Farmers & Merchants State Bank of New York Mills, Incorporated did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, none of Farmers & Merchants State Bank of New York Mills, Incorporated'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 problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Farmers & Merchants State Bank of New York Mills, Incorporated's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

Farmers & Merchants State Bank of New York Mills, Incorporated scored 14 out of a possible 30 on Bankrate's earnings test, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. Farmers & Merchants State Bank of New York Mills, Incorporated's most recent annualized quarterly return on equity was 6.66 percent, below the national average of 8.10 percent.

The bank earned net income of $589,000 on total equity of $8.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.89 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.