Safe and Sound

Merchants Bank of Indiana

Carmel, IN
5
Star Rating
Merchants Bank of Indiana is a Carmel, IN-based, FDIC-insured bank that opened its doors in 1923. Regulatory filings show the bank having equity of $411.5 million on assets of $3.39 billion, as of December 31, 2017.

With 187 full-time employees in 5 offices in IN, the bank currently holds loans and leases worth $2.36 billion, including real estate loans of $896.2 million. U.S. bank customers currently have $2.95 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Merchants Bank of Indiana exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is a crucial measurement of a bank's financial resilience. When it comes to safety and soundness, more capital is preferred.

Merchants Bank of Indiana received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Merchants Bank of Indiana's Tier 1 capital ratio was 15.35 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Merchants Bank of Indiana held equity amounting to 12.12 percent of its assets, which exceeded 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 troubled assets, such as past-due loans.

Having a large number of these types of assets may eventually force a bank to use capital to absorb losses, shrinking its cushion of equity. 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, diminishing earnings and elevating the chances of a failure in the future.

Merchants Bank of Indiana scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.13 percent of Merchants Bank of Indiana'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 known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used 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 Merchants Bank of Indiana's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses take away from a bank's ability to do those things.

Merchants Bank of Indiana beat the national average on Bankrate's earnings test, achieving a score of 24 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Merchants Bank of Indiana was 20.28 percent, above the national average of 8.10 percent.

The bank reported net income of $60.6 million on total equity of $411.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.99 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.