Safe and Sound

Volunteer State Bank

Portland, TN
4
Star Rating
Volunteer State Bank is a Portland, TN-based, FDIC-insured bank that opened its doors in 1977. The bank holds equity of $60.8 million on $621.7 million in assets, according to December 31, 2017, regulatory filings.

With 237 full-time employees in 10 offices in TN, the bank holds loans and leases worth $524.3 million, including real estate loans of $461.7 million. U.S. bank customers currently have $474.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Volunteer State Bank 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 important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for account holders during periods of financial instability for the bank. Therefore, when it comes to measuring an a bank's financial resilience, capital is important. From a safety and soundness perspective, more capital is preferred.

Volunteer State Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, below the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Volunteer State Bank's Tier 1 capital ratio was 10.85 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, Volunteer State Bank held equity amounting to 9.78 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

Having lots of these types of assets suggests a bank may have to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and elevating the chances of a future failure.

Volunteer State Bank scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.19 percent of Volunteer State 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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Volunteer State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is 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, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, Volunteer State Bank scored 24 out of a possible 30, beating out the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Volunteer State Bank's most recent annualized quarterly return on equity was 14.47 percent, above the national average of 8.10 percent.

The bank reported net income of $8.6 million on total equity of $60.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.44 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.