Safe and Sound

SOUTHERN BANK OF TENNESSEE

Mount Juliet, TN
5
Star Rating
Started in 1999, SOUTHERN BANK OF TENNESSEE is an FDIC-insured bank headquartered in Mount Juliet, TN. Regulatory filings show the bank having equity of $29.2 million on assets of $258.9 million, as of December 31, 2017.

Thanks to the work of 57 full-time employees in 4 offices in TN, the bank has amassed loans and leases worth $196.2 million, including real estate loans of $174.2 million. U.S. bank customers currently have $227.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, SOUTHERN BANK OF TENNESSEE exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors during times of financial instability for the bank. It follows then that a bank's level of capital is a key measurement of a bank's financial fortitude. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, SOUTHERN BANK OF TENNESSEE received a score of 12 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. SOUTHERN BANK OF TENNESSEE's Tier 1 capital ratio was 12.84 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, SOUTHERN BANK OF TENNESSEE held equity amounting to 11.27 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these types of assets means a bank could eventually have to use capital to absorb losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

SOUTHERN BANK OF TENNESSEE scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of SOUTHERN BANK OF TENNESSEE's loans were noncurrent -- in other words, 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 how large that reserve is 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 SOUTHERN BANK OF TENNESSEE's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's earnings test, SOUTHERN BANK OF TENNESSEE scored 18 out of a possible 30, exceeding the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. SOUTHERN BANK OF TENNESSEE's most recent annualized quarterly return on equity was 10.28 percent, above the national average of 8.10 percent.

The bank earned net income of $2.9 million on total equity of $29.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.14 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.