Safe and Sound

The First National Bank of Manchester

Manchester, TN
5
Star Rating
Manchester, TN-based The First National Bank of Manchester is an FDIC-insured bank started in 1900. Regulatory filings show the bank having equity of $32.9 million on assets of $268.5 million, as of December 31, 2017.

With 64 full-time employees in 4 offices in TN, the bank has amassed loans and leases worth $172.9 million, including real estate loans of $131.0 million. U.S. bank customers currently have $232.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Manchester exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as 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 an institution's financial strength. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The First National Bank of Manchester achieved a score of 16 out of a possible 30 points, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First National Bank of Manchester's Tier 1 capital ratio was 28.15 percent, higher than the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, The First National Bank of Manchester held equity amounting to 12.24 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

Having large numbers of these types of assets means a bank could eventually have to use capital to cover losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

The First National Bank of Manchester scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.55 percent of The First National Bank of Manchester'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 deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The First National Bank of Manchester's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses take away from a bank's ability to do those things.

The First National Bank of Manchester received above-average marks on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The First National Bank of Manchester's most recent annualized quarterly return on equity was 10.61 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.5 million on total equity of $32.9 million. The bank had an annualized return on average assets, or ROA, of 1.32 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.