2019 Journal of Community Bank Case Studies

University of Tennessee at Martin

THIRD PLACE:

increase loans by $381 million and deposits by $602 million (Flessner). Although acquisitions contributed to FirstBank reaching $5.1 billion in assets as of year-end 2018, FirstBank has also generated ample organic growth as demonstrated within the three markets featured in this report. The Memphis, Paris, and Fairview market have had loan growth of 249.9%, 30.88%, and 90.27% respectively. Most of the rural communities to which FirstBank provides its services hold more deposits than loans. These valuable deposits are, first, used to fund local growth and then to assist FirstBank’s high growth areas such as Memphis and Nashville as well as increase overall liquidity for the bank. For example, Fairview’s loans to deposits ratio is 45.6% as of year-end 2018 while Memphis’s and Paris’s ratios are 189.4% and 113.2%, respectively. Across the entire bank for markets classified as “metropolitan” and “community,” loans to deposits were 105.7% and 54.3%, respectively (Gordon). D. Capital Levels

2. Tier 1 capital / Risk-weighted assets: ≥ 8% 3. Total capital / Risk-weighted assets: ≥ 6.5% 4. Tier 1 capital / Average assets: ≥ 5% According to Exhibit 7, FirstBank is currently significantly above the minimum capital requirements of BASEL III to be classified as a well-capitalized institution. E. Liquidity Customer deposits are heavily sought to fund FirstBank’s continued growth. FirstBank has several strategies to obtain deposits, including: superior customer service and involvement in the community. This interaction familiarizes potential customers with the FirstBank brand and staff, thus encouraging them to bank with FirstBank. The internal growth of the bank is prevalent through deposits growth in each of the three markets mentioned earlier. In the past five years, deposits have grown 24.3%, 66.4%, and 241% for Paris, Fairview, and Memphis, respectively. The large increase in deposits can be attributed to the growing metropolitan

FirstBank strives to have adequate capital levels in accordance with the BASEL III requirements that became effective in 2013. The requirements to be a “well-capitalized institution” under BASEL III include the following criteria: 1. Common Equity Tier 1 / Risk- weighted Assets: ≥ 10%

Exhibit 7: FirstBank vs. BASEL III “Well-Capitalized Institution”

FirstBank BASEL III

15.00%

12.00%

11.40%

10.70%10.00%

10.50%

10.00%

8.00%

6.50%

5.00%

5.00%

Percentage

0.00%

1

2

3

4

57