Safe and Sound

The Merchants and Farmers Bank of Salisbury

Salisbury, MO
4
Star Rating
Started in 1903, The Merchants and Farmers Bank of Salisbury is an FDIC-insured bank headquartered in Salisbury, MO. Regulatory filings show the bank having equity of $8.5 million on $101.6 million in assets, as of December 31, 2017.

U.S. bank customers have $93.1 million on deposit at 4 offices in MO run by 28 full-time employees. With that footprint, the bank currently holds loans and leases worth $56.7 million, including real estate loans of $44.9 million.

Overall, Bankrate believes that, as of December 31, 2017, The Merchants and Farmers Bank of Salisbury exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It works as a buffer against losses and affords protection for accountholders during times of economic trouble for the bank. From a safety and soundness perspective, the more capital, the better.

The Merchants and Farmers Bank of Salisbury fell below the national average of 13.13 on our test to measure capital adequacy, racking up 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The Merchants and Farmers Bank of Salisbury's Tier 1 capital ratio was 14.22 percent, exceeding the 6 percent level regulators consider adequate, 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 downturns.

Overall, The Merchants and Farmers Bank of Salisbury held equity amounting to 8.32 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

A bank with a large number of these types of assets could eventually have to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and elevating the chances of a future failure.

The Merchants and Farmers Bank of Salisbury beat out 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 helpful indicator of asset quality.As of December 31, 2017, 0.02 percent of The Merchants and Farmers Bank of Salisbury'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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. The Merchants and Farmers Bank of Salisbury's loan loss allowance was 11,080.00 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 has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Losses, on the other hand, take away from a bank's ability to do those things.

The Merchants and Farmers Bank of Salisbury scored 14 out of a possible 30 on Bankrate's earnings test, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The Merchants and Farmers Bank of Salisbury was 6.63 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $559,000 on total equity of $8.5 million. The bank had an annualized return on average assets, or ROA, of 0.57 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.