Safe and Sound

Marion Bank and Trust Company

Marion, AL
4
Star Rating
Marion Bank and Trust Company is an FDIC-insured bank founded in 1934 and currently headquartered in Marion, AL. As of December 31, 2017, the bank had equity of $30.7 million on assets of $265.7 million.

Thanks to the work of 42 full-time employees in 3 offices in AL, the bank holds loans and leases worth $167.9 million, $134.9 million of which are for real estate. The bank currently holds $221.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Marion Bank and Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is valuable. It acts as a cushion against losses and as protection for depositors when a bank is experiencing financial instability. When it comes to safety and soundness, more capital is better.

Marion Bank and Trust Company achieved a score of 14 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Marion Bank and Trust Company's Tier 1 capital ratio was 16.07 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Marion Bank and Trust Company held equity amounting to 11.54 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to absorb losses, diminishing 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 money, pushing down earnings and elevating the chances of a failure in the future.

Marion Bank and Trust Company scored 32 out of a possible 40 points on Bankrate's test of asset quality, coming in below 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, 0.35 percent of Marion Bank and Trust Company'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 deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Marion Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic shocks. Conversely, losses diminish a bank's ability to do those things.

Marion Bank and Trust Company scored 12 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Marion Bank and Trust Company's most recent annualized quarterly return on equity was 5.85 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.8 million on total equity of $30.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.68 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.