Safe and Sound

The Mercantile Bank of Louisiana, Missouri

Louisiana, MO
5
Star Rating
Founded in 1880, The Mercantile Bank of Louisiana, Missouri is an FDIC-insured bank based in Louisiana, MO. The bank has equity of $23.2 million on $108.5 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 24 full-time employees, the bank holds loans and leases worth $62.0 million, including real estate loans of $57.4 million. The bank currently holds $82.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Mercantile Bank of Louisiana, Missouri exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major 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 acts as a cushion against losses and provides protection for depositors during periods of economic instability for the bank. It follows then that when it comes to measuring an an institution's financial fortitude, capital is valuable. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, The Mercantile Bank of Louisiana, Missouri racked up 30 out of a possible 30 points, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Mercantile Bank of Louisiana, Missouri's Tier 1 capital ratio was 30.23 percent, higher than the 6 percent level considered adequate by regulators, 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 Mercantile Bank of Louisiana, Missouri held equity amounting to 21.42 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 troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets may eventually require a bank to use capital to absorb losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

The Mercantile Bank of Louisiana, Missouri scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.10 percent of The Mercantile Bank of Louisiana, Missouri'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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. The Mercantile Bank of Louisiana, Missouri's loan loss allowance was 3,740.30 percent of its total noncurrent loans, above the national average. All things 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, increasing its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

The Mercantile Bank of Louisiana, Missouri did below-average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for The Mercantile Bank of Louisiana, Missouri was 5.15 percent, below the national average of 8.10 percent.

The bank reported net income of $1.2 million on total equity of $23.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.10 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.