Safe and Sound

First Bank of Tennessee

Spring City, TN
4
Star Rating
First Bank of Tennessee is a Spring City, TN-based, FDIC-insured bank started in 1890. The bank has equity of $31.9 million on assets of $316.6 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 78 full-time employees in 6 offices in TN, the bank has amassed loans and leases worth $254.7 million, including real estate loans of $221.9 million. U.S. bank customers currently have $265.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Bank of Tennessee 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 key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of an institution's financial strength. From a safety and soundness perspective, the higher the capital, the better.

First Bank of Tennessee finished below the national average of 13.13 on our test to measure capital adequacy, racking up 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Bank of Tennessee's Tier 1 capital ratio was 12.32 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic challenges.

Overall, First Bank of Tennessee held equity amounting to 10.09 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these types of assets suggests a bank could eventually have to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and elevating the chances of a failure in the future.

First Bank of Tennessee scored 32 out of a possible 40 points on Bankrate's asset quality test, lower than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 2.38 percent of First Bank of Tennessee'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 problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic 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 First Bank of Tennessee's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

First Bank of Tennessee scored 22 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. First Bank of Tennessee's most recent annualized quarterly return on equity was 14.17 percent, above the national average of 8.10 percent.

The bank reported net income of $4.5 million on total equity of $31.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.46 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.