Safe and Sound

The Farmers and Merchants National Bank of Nashville

Nashville, IL
5
Star Rating
Founded in 1906, The Farmers and Merchants National Bank of Nashville is an FDIC-insured bank based in Nashville, IL. The bank holds equity of $21.9 million on $171.1 million in assets, according to December 31, 2017, regulatory filings.

With 46 full-time employees in 7 offices in IL, the bank holds loans and leases worth $110.9 million, including real estate loans of $96.0 million. U.S. bank customers currently have $148.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Farmers and Merchants National Bank of Nashville exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a key measurement of an institution's financial strength. When it comes to safety and soundness, the more capital, the better.

The Farmers and Merchants National Bank of Nashville scored above the national average of 13.13 points on our test to measure capital adequacy, scoring 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. The Farmers and Merchants National Bank of Nashville's Tier 1 capital ratio was 20.04 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, The Farmers and Merchants National Bank of Nashville held equity amounting to 12.82 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these kinds of assets suggests a bank may eventually have to use capital to absorb losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and increasing the risk of a future failure.

The Farmers and Merchants National Bank of Nashville scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.32 percent of The Farmers and Merchants National Bank of Nashville'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." 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 National Bank of Nashville's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. The Farmers and Merchants National Bank of Nashville's most recent annualized quarterly return on equity was 9.63 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $2.1 million on total equity of $21.9 million. The bank reported an annualized return on average assets, or ROA, of 1.20 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.