Safe and Sound

Bank of Perry County

Lobelville, TN
5
Star Rating
Lobelville, TN-based Bank of Perry County is an FDIC-insured bank started in 1905. The bank has equity of $15.3 million on $162.4 million in assets, according to December 31, 2017, regulatory filings.

With 39 full-time employees in 3 offices in TN, the bank has amassed loans and leases worth $132.8 million, including real estate loans of $95.7 million. U.S. bank customers currently have $134.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Perry County exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for account holders during periods of financial trouble for the bank. It follows then that a bank's level of capital is a useful measurement of a bank's financial fortitude. When looking at safety and soundness, the higher the capital, the better.

Bank of Perry County scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 10 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Bank of Perry County's Tier 1 capital ratio was 12.99 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial challenges.

Overall, Bank of Perry County held equity amounting to 9.43 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these types of assets may eventually require a bank to use capital to cover losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Bank of Perry County fell below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.54 percent of Bank of Perry County'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 troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of Perry County'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, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Bank of Perry County scored 26 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Bank of Perry County's most recent annualized quarterly return on equity was 16.81 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.6 million on total equity of $15.3 million. The bank reported an annualized return on average assets, or ROA, of 1.62 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.