Safe and Sound

The Merchants National Bank of Sacramento

Sacramento, CA
4
Star Rating
The Merchants National Bank of Sacramento is a Sacramento, CA-based, FDIC-insured bank started in 1921. Regulatory filings show the bank having equity of $20.8 million on $216.6 million in assets, as of December 31, 2017.

Thanks to the efforts of 18 full-time employees in 4 offices in CA, the bank currently holds loans and leases worth $84.3 million, including real estate loans of $82.7 million. The bank currently holds $190.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Merchants National Bank of Sacramento exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is key. It acts as a cushion against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

The Merchants National Bank of Sacramento finished below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Merchants National Bank of Sacramento's Tier 1 capital ratio was 22.81 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, The Merchants National Bank of Sacramento held equity amounting to 9.59 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets could eventually require 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 interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, none of The Merchants National Bank of Sacramento'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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size 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. Unfortunately, the FDIC did not provide information on The Merchants National Bank of Sacramento's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

The Merchants National Bank of Sacramento scored 8 out of a possible 30 on Bankrate's test of earnings, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The Merchants National Bank of Sacramento was 3.75 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $788,000 on total equity of $20.8 million. The bank had an annualized return on average assets, or ROA, of 0.37 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.