Safe and Sound

First Metro Bank

Muscle Shoals, AL
5
Star Rating
Founded in 1988, First Metro Bank is an FDIC-insured bank headquartered in Muscle Shoals, AL. As of June 30, 2017, the bank held equity of $67.7 million on $602,136,000 in assets.

U.S. bank customers have $532.7 million on deposit at 8 offices in AL run by 114 full-time employees. With that footprint, the bank has amassed loans and leases worth $371.7 million, including $295.7 million worth of real estate loans.

Overall, Bankrate believes that, as of June 30, 2017, First Metro Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial resilience. It works as a buffer against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.
On our test to measure capital adequacy, First Metro Bank scored 14 out of a possible 30 points, beating the national average of 13.38.

One important measure of this buffer is a bank's Tier 1 capital ratio. First Metro Bank's Tier 1 capital ratio was 19.41 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, First Metro Bank held equity amounting to 11.25 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these kinds of assets could eventually force a bank to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the chances of a future failure.

First Metro Bank did better than the national average of 37.62 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 June 30, 2017, 0.06 percent of First Metro Bank'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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the that reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. First Metro Bank's loan loss allowance was 1,113.95 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

First Metro Bank scored 20 out of a possible 30 on Bankrate's earnings test, beating the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for First Metro Bank was 11.33 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $3.7 million on total equity of $67.7 million. The bank had an annualized return on average assets, or ROA, of 1.28 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.