Safe and Sound

Johnson County Bank

Mountain City, TN
5
Star Rating
Johnson County Bank is an FDIC-insured bank founded in 1975 and currently based in Mountain City, TN. As of December 31, 2017, the bank held equity of $17.9 million on $119.4 million in assets.

Thanks to the efforts of 23 full-time employees, the bank holds loans and leases worth $64.6 million, $56.2 million of which are for real estate. U.S. bank customers currently have $98.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Johnson County Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial resilience, capital is crucial. When it comes to safety and soundness, more capital is better.

On our test to measure capital adequacy, Johnson County Bank racked up 22 out of a possible 30 points, beating out the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Johnson County Bank's Tier 1 capital ratio was 28.41 percent, exceeding the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Johnson County Bank held equity amounting to 15.02 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to cover losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Johnson County Bank scored 36 out of a possible 40 points, falling short of the national average of 37.49 points.

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, 3.05 percent of Johnson County Bank'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Johnson County Bank's loan loss allowance in its most recent filings.

Earnings score

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

On Bankrate's earnings test, Johnson County Bank scored 14 out of a possible 30, failing to reach the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Johnson County Bank was 6.27 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.1 million on total equity of $17.9 million. The bank had an annualized return on average assets, or ROA, of 0.91 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.