Safe and Sound

The First Bank and Trust Company

Lebanon, VA
5
Star Rating
Lebanon, VA-based The First Bank and Trust Company is an FDIC-insured bank started in 1979. The bank has equity of $193.4 million on $1.71 billion in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $1.42 billion on deposit at 26 offices in multiple states run by 351 full-time employees. With that footprint, the bank currently holds loans and leases worth $1.39 billion, $1.08 billion of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, The First Bank and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared 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 acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial resilience, capital is useful. When it comes to safety and soundness, more capital is preferred.

The First Bank and Trust Company beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First Bank and Trust Company's Tier 1 capital ratio was 15.11 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, The First Bank and Trust Company held equity amounting to 11.30 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these kinds of assets means a bank may have to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, diminishing earnings and increasing the chances of a future failure.

On Bankrate's test of asset quality, The First Bank and Trust Company scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.42 percent of The First Bank and Trust Company's loans were noncurrent, meaning 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 to handle problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The First Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, The First Bank and Trust Company scored 20 out of a possible 30, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The First Bank and Trust Company's most recent annualized quarterly return on equity was 11.09 percent, above the national average of 8.10 percent.

The bank reported net income of $20.9 million on total equity of $193.4 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.26 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.