Safe and Sound

Merchants & Farmers Bank & Trust Company

Leesville, LA
4
Star Rating
Founded in 1928, Merchants & Farmers Bank & Trust Company is an FDIC-insured bank headquartered in Leesville, LA. Regulatory filings show the bank having equity of $43.9 million on $410.8 million in assets, as of December 31, 2017.

With 88 full-time employees in 7 offices in LA, the bank holds loans and leases worth $221.3 million, including real estate loans of $203.7 million. U.S. bank customers currently have $301.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Merchants & Farmers Bank & 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 fared on the three important criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial resilience. It works as a buffer against losses and affords protection for depositors when a bank is experiencing economic instability. From a safety and soundness perspective, the more capital, the better.

Merchants & Farmers Bank & Trust Company received a score of 10 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Merchants & Farmers Bank & Trust Company's Tier 1 capital ratio was 17.47 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Merchants & Farmers Bank & Trust Company held equity amounting to 10.68 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 troubled assets, such as unpaid loans.

Having large numbers of these kinds of assets suggests a bank could eventually have to use capital to cover 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 diminished earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Merchants & Farmers Bank & Trust Company scored 36 out of a possible 40 points, coming in below the national average of 37.49 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, 1.08 percent of Merchants & Farmers Bank & 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 above the national average of 1.01 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Merchants & Farmers Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

Merchants & Farmers Bank & Trust Company scored 12 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Merchants & Farmers Bank & Trust Company was 5.70 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $2.5 million on total equity of $43.9 million. The bank reported an annualized return on average assets, or ROA, of 0.61 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.