Safe and Sound

The Farmers and Merchants Bank

Caldwell, OH
4
Star Rating
Started in 1912, The Farmers and Merchants Bank is an FDIC-insured bank based in Caldwell, OH. The bank holds equity of $14.7 million on assets of $112.5 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 33 full-time employees, the bank holds loans and leases worth $81.2 million, including $62.6 million worth of real estate loans. U.S. bank customers currently have $97.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The 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 fared on the three key criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial fortitude. It acts as a buffer against losses and affords protection for accountholders when a bank is experiencing financial trouble. When it comes to safety and soundness, the more capital, the better.

The Farmers and Merchants Bank achieved a score of 18 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The Farmers and Merchants Bank's Tier 1 capital ratio was 21.17 percent, above the 6 percent level considered adequate by regulators, 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 challenges.

Overall, The Farmers and Merchants Bank held equity amounting to 13.04 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand 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 large numbers of these kinds of assets may eventually be required to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, The Farmers and Merchants Bank scored 32 out of a possible 40 points, lower than the national average of 37.49 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, 2.74 percent of The 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 above 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 . Comparing the reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Farmers and Merchants Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

The Farmers and Merchants Bank scored 18 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The Farmers and Merchants Bank's most recent annualized quarterly return on equity was 8.43 percent, above the national average of 8.10 percent.

The bank earned net income of $1.2 million on total equity of $14.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.11 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.