Safe and Sound

The Merchants & Planters Bank

Clarendon, AR
4
Star Rating
The Merchants & Planters Bank is a Clarendon, AR-based, FDIC-insured bank founded in 1890. Regulatory filings show the bank having equity of $5.0 million on assets of $48.0 million, as of December 31, 2017.

Thanks to the work of 11 full-time employees, the bank holds loans and leases worth $10.4 million, including $2.3 million worth of real estate loans. The bank currently holds $43.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Merchants & Planters Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors during times of economic instability for the bank. It follows then that when it comes to measuring an a bank's financial fortitude, capital is important. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, The Merchants & Planters Bank received a score of 12 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. The Merchants & Planters Bank's Tier 1 capital ratio was 30.73 percent, higher than the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial challenges.

Overall, The Merchants & Planters Bank held equity amounting to 10.40 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets could eventually be required to use capital to absorb losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, The Merchants & Planters Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

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, 0.86 percent of The Merchants & Planters Bank'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 handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Merchants & Planters Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, The Merchants & Planters Bank scored 12 out of a possible 30, falling short of the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for The Merchants & Planters Bank was 4.94 percent, below the national average of 8.10 percent.

The bank earned net income of $253,000 on total equity of $5.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.55 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.