Safe and Sound

First Volunteer Bank

Chattanooga, TN
5
Star Rating
Started in 1904, First Volunteer Bank is an FDIC-insured bank headquartered in Chattanooga, TN. Regulatory filings show the bank having equity of $104.1 million on assets of $952.2 million, as of December 31, 2017.

With 269 full-time employees in 24 offices in multiple states, the bank has amassed loans and leases worth $753.2 million, including real estate loans of $675.5 million. U.S. bank customers currently have $839.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Volunteer Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial strength. It acts as a buffer against losses and as protection for accountholders when a bank is experiencing economic trouble. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, First Volunteer Bank received a score of 12 out of a possible 30 points, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Volunteer Bank's Tier 1 capital ratio was 13.48 percent, exceeding the 6 percent level regulators consider adequate, but below 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 Volunteer Bank held equity amounting to 10.93 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 capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

Having extensive holdings of these kinds of assets may eventually force a bank to use capital to cover losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the chances of a failure in the future.

First Volunteer Bank fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 36 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, 0.75 percent of First Volunteer 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . 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 troubled assets. Unfortunately, the FDIC did not provide information on First Volunteer Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability 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, likely making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's earnings test, First Volunteer Bank scored 22 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. First Volunteer Bank's most recent annualized quarterly return on equity was 13.23 percent, above the national average of 8.10 percent.

The bank reported net income of $13.4 million on total equity of $104.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.41 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.