Safe and Sound

First Bank and Trust of Memphis

Memphis, TX
5
Star Rating
Founded in 1898, First Bank and Trust of Memphis is an FDIC-insured bank based in Memphis, TX. As of December 31, 2017, the bank had equity of $7.5 million on assets of $62.8 million.

Thanks to the work of 10 full-time employees, the bank currently holds loans and leases worth $42.1 million, $25.1 million of which are for real estate. U.S. bank customers currently have $54.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Bank and Trust of Memphis exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a key measurement of a bank's financial resilience. When looking at safety and soundness, the higher the capital, the better.

First Bank and Trust of Memphis scored above the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. First Bank and Trust of Memphis's Tier 1 capital ratio was 17.58 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, First Bank and Trust of Memphis held equity amounting to 11.93 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due loans.

Having a large number of these kinds of assets means a bank could have to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

First Bank and Trust of Memphis beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.30 percent of First Bank and Trust of Memphis's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First Bank and Trust of Memphis's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, potentially making the bank better able to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

First Bank and Trust of Memphis outperformed the average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for First Bank and Trust of Memphis was 13.60 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.0 million on total equity of $7.5 million. The bank had an annualized return on average assets, or ROA, of 1.63 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.