Safe and Sound

First Community Bank of Tennessee

Shelbyville, TN
5
Star Rating
First Community Bank of Tennessee is an FDIC-insured bank started in 1988 and currently headquartered in Shelbyville, TN. As of December 31, 2017, the bank held equity of $60.4 million on $481.8 million in assets.

U.S. bank customers have $304.1 million on deposit at 5 offices in TN run by 451 full-time employees. With that footprint, the bank holds loans and leases worth $331.2 million, including $294.4 million worth of real estate loans.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial resilience. It acts as a cushion against losses and affords protection for depositors when a bank is experiencing financial instability. When looking at safety and soundness, more capital is better.

First Community Bank of Tennessee finished below the national average of 13.13 on our test to measure capital adequacy, racking up 8 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. First Community Bank of Tennessee's Tier 1 capital ratio was 13.57 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, First Community Bank of Tennessee held equity amounting to 12.54 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

Having extensive holdings of these types of assets means a bank may have to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a failure in the future.

First Community Bank of Tennessee scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.16 percent of First Community Bank of Tennessee'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 to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy 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 First Community Bank of Tennessee's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

First Community Bank of Tennessee did above-average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for First Community Bank of Tennessee was 12.75 percent, above the national average of 8.10 percent.

The bank earned net income of $7.3 million on total equity of $60.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.55 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.