Safe and Sound

First Community Bank of East Tennessee

Rogersville, TN
4
Star Rating
Rogersville, TN-based First Community Bank of East Tennessee is an FDIC-insured bank founded in 1993. The bank has equity of $20.6 million on $171.3 million in assets, according to December 31, 2017, regulatory filings.

With 55 full-time employees in 6 offices in TN, the bank currently holds loans and leases worth $113.1 million, including real estate loans of $93.2 million. U.S. bank customers currently have $141.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Community Bank of East Tennessee exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial fortitude, capital is valuable. When looking at safety and soundness, the more capital, the better.

First Community Bank of East Tennessee scored 16 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. First Community Bank of East Tennessee's Tier 1 capital ratio was 15.84 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, First Community Bank of East Tennessee held equity amounting to 12.03 percent of its assets, which was equal to the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due mortgages.

Having lots of these types of assets could eventually force a bank to use capital to absorb losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

First Community Bank of East Tennessee scored 36 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.87 percent of First Community Bank of East Tennessee's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First Community Bank of East Tennessee's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. Losses, on the other hand, diminish a bank's ability to do those things.

First Community Bank of East Tennessee scored 14 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. First Community Bank of East Tennessee's most recent annualized quarterly return on equity was 6.45 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.4 million on total equity of $20.6 million. The bank reported an annualized return on average assets, or ROA, of 0.78 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.