Safe and Sound

The First National Bank of Mertzon

Mertzon, TX
4
Star Rating
Founded in 1910, The First National Bank of Mertzon is an FDIC-insured bank based in Mertzon, TX. As of December 31, 2017, the bank held equity of $26.4 million on assets of $380.1 million.

With 33 full-time employees in 3 offices in TX, the bank holds loans and leases worth $62.0 million, including real estate loans of $37.8 million. U.S. bank customers currently have $353.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Mertzon 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 important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial strength, capital is essential. From a safety and soundness perspective, the more capital, the better.

The First National Bank of Mertzon came in below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 4 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The First National Bank of Mertzon's Tier 1 capital ratio was 26.56 percent, higher than the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, The First National Bank of Mertzon held equity amounting to 6.95 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 loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

Having lots of these types of assets could eventually force a bank to use capital to cover losses, decreasing 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 money, reducing earnings and increasing the risk of a future failure.

The First National Bank of Mertzon scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.03 percent of The First National Bank of Mertzon's loans were noncurrent, meaning 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 problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. The First National Bank of Mertzon's loan loss allowance was 7,181.25 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

The First National Bank of Mertzon scored 18 out of a possible 30 on Bankrate's earnings test, 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 (essentially profit) divided by total equity. The First National Bank of Mertzon's most recent annualized quarterly return on equity was 8.98 percent, above the national average of 8.10 percent.

The bank earned net income of $2.3 million on total equity of $26.4 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.64 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.