Safe and Sound

Chester County Bank

Henderson, TN
4
Star Rating
Founded in 1968, Chester County Bank is an FDIC-insured bank based in Henderson, TN. The bank has equity of $7.5 million on $70.1 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $62.5 million on deposit at 4 offices in TN run by 24 full-time employees. With that footprint, the bank holds loans and leases worth $25.4 million, including real estate loans of $18.3 million.

Overall, Bankrate believes that, as of December 31, 2017, Chester County Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial resilience. It works as a buffer against losses and provides protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is better.

Chester County Bank fell short of the national average of 13.13 on our test to measure capital adequacy, receiving a score of 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Chester County Bank's Tier 1 capital ratio was 26.12 percent, exceeding the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Chester County Bank held equity amounting to 10.72 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 effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these types of assets may eventually be forced to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, Chester County Bank scored 40 out of a possible 40 points, beating the national average of 37.49 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, 0.59 percent of Chester County Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Chester County Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

Chester County Bank scored 14 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. Chester County Bank's most recent annualized quarterly return on equity was 6.50 percent, below the national average of 8.10 percent.

The bank reported net income of $487,000 on total equity of $7.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.69 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.