Safe and Sound

First Farmers and Merchants Bank

Columbia, TN
4
Star Rating
First Farmers and Merchants Bank is a Columbia, TN-based, FDIC-insured bank that opened its doors in 1909. The bank holds equity of $124.8 million on assets of $1.38 billion, according to December 31, 2017, regulatory filings.

With 269 full-time employees in 23 offices in TN, the bank holds loans and leases worth $846.5 million, including real estate loans of $648.7 million. U.S. bank customers currently have $1.21 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Farmers and Merchants 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 key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is useful. It works as a buffer against losses and affords protection for accountholders during times of financial trouble for the bank. From a safety and soundness perspective, more capital is better.

On our test to measure capital adequacy, First Farmers and Merchants Bank received a score of 8 out of a possible 30 points, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Farmers and Merchants Bank's Tier 1 capital ratio was 12.95 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, First Farmers and Merchants Bank held equity amounting to 9.06 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

Having extensive holdings of these kinds of assets suggests a bank could have to use capital to cover losses, shrinking 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 interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

First Farmers and Merchants Bank scored above 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 handy indicator of asset quality.As of December 31, 2017, 0.32 percent of First Farmers and Merchants Bank's loans were noncurrent, meaning 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 deal with 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 troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First Farmers and Merchants Bank'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 cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

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

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. First Farmers and Merchants Bank's most recent annualized quarterly return on equity was 9.01 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $10.6 million on total equity of $124.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.78 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.