Safe and Sound

Merrick Bank

South Jordan, UT
5
Star Rating
Merrick Bank is an FDIC-insured bank founded in 1997 and currently headquartered in South Jordan, UT. The bank holds equity of $630.2 million on $3.50 billion in assets, according to December 31, 2017, regulatory filings.

With 260 full-time employees, the bank holds loans and leases worth $2.83 billion, including real estate loans of $0. U.S. bank customers currently have $2.83 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Merrick Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of 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 bulwark against losses and as protection for depositors when a bank is experiencing financial instability. Therefore, a bank's level of capital is a crucial measurement of an institution's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

Merrick Bank scored 26 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Merrick Bank's Tier 1 capital ratio was 18.54 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Merrick Bank held equity amounting to 17.99 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 unpaid loans.

Having a large number of these kinds of assets could eventually require a bank 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, diminishing earnings and increasing the chances of a failure in the future.

On Bankrate's test of asset quality, Merrick Bank scored 36 out of a possible 40 points, coming in below the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 4.16 percent of Merrick Bank's loans were noncurrent, meaning 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Merrick Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic shocks. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Merrick Bank scored 20 out of a possible 30, better than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Merrick Bank's most recent annualized quarterly return on equity was 10.50 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $66.4 million on total equity of $630.2 million. The bank experienced an annualized return on average assets, or ROA, of 2.09 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.