Safe and Sound

First Century Bank

Tazewell, TN
5
Star Rating
First Century Bank is a Tazewell, TN-based, FDIC-insured bank that opened its doors in 1899. The bank has equity of $34.0 million on assets of $347.5 million, according to December 31, 2017, regulatory filings.

With 82 full-time employees in 9 offices in TN, the bank has amassed loans and leases worth $296.0 million, including real estate loans of $266.3 million. U.S. bank customers currently have $309.0 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is crucial. It acts as a bulwark against losses and as protection for accountholders during periods of financial instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

First Century Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. First Century Bank's Tier 1 capital ratio was 12.01 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, First Century Bank held equity amounting to 9.78 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 troubled assets, such as past-due mortgages.

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

First Century Bank exceeded the national average of 37.49 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 helpful indicator of asset quality.As of December 31, 2017, 0.35 percent of First Century 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 1.01 percent.

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

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

First Century Bank did above-average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. First Century Bank's most recent annualized quarterly return on equity was 11.09 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.6 million on total equity of $34.0 million. The bank reported an annualized return on average assets, or ROA, of 1.07 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.