Safe and Sound

Franklin Synergy Bank

Franklin, TN
5
Star Rating
Franklin, TN-based Franklin Synergy Bank is an FDIC-insured bank founded in 2007. The bank has equity of $347.6 million on $3,441,215,000 in assets, according to June 30, 2017, regulatory filings.

U.S. bank customers have $2.76 billion on deposit at 12 offices in TN run by 270 full-time employees. With that footprint, the bank currently holds loans and leases worth $2.00 billion, including real estate loans of $1.60 billion.

Overall, Bankrate believes that, as of June 30, 2017, Franklin Synergy Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for accountholders when a bank is struggling financially. Therefore, a bank's level of capital is an important measurement of an institution's financial resilience. When looking at safety and soundness, the more capital, the better.
Franklin Synergy Bank came in below the national average of 13.38 on our test to measure capital adequacy, achieving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Franklin Synergy Bank's Tier 1 capital ratio was 13.77 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, Franklin Synergy Bank held equity amounting to 10.10 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

Having a large number of these types of assets could eventually force a bank to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and increasing the chances of a failure in the future.

Franklin Synergy Bank beat out the national average of 37.62 on Bankrate's asset quality test, 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 June 30, 2017, 0.19 percent of Franklin Synergy Bank'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 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Franklin Synergy Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, potentially 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, Franklin Synergy Bank scored 20 out of a possible 30, better than the national average of 16.52.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Franklin Synergy Bank was 10.94 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $18.4 million on total equity of $347.6 million. The bank had an annualized return on average assets, or ROA, of 1.12 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 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.