Safe and Sound

McKenzie Banking Company

Mc Kenzie, TN
4
Star Rating
Founded in 1934, McKenzie Banking Company is an FDIC-insured bank headquartered in Mc Kenzie, TN. The bank has equity of $16.5 million on $130.5 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 81 full-time employees in 9 offices in TN, the bank has amassed loans and leases worth $65.8 million, including $39.5 million worth of real estate loans. U.S. bank customers currently have $112.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, McKenzie Banking Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is useful. It works as a cushion against losses and affords protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is better.

On our test to measure capital adequacy, McKenzie Banking Company scored 16 out of a possible 30 points, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. McKenzie Banking Company's Tier 1 capital ratio was 22.93 percent, higher than 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 weather economic downturns.

Overall, McKenzie Banking Company held equity amounting to 12.65 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having extensive holdings of these kinds of assets may eventually require a bank to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the chances of a future failure.

McKenzie Banking Company scored 32 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 2.44 percent of McKenzie Banking Company'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 at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on McKenzie Banking Company'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, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial shocks. However, banks that are losing money are less able to do those things.

McKenzie Banking Company scored 18 out of a possible 30 on Bankrate's test of earnings, exceeding 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. The most recent annualized quarterly return on equity for McKenzie Banking Company was 8.64 percent, above the national average of 8.10 percent.

The bank reported net income of $1.5 million on total equity of $16.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.16 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.