Safe and Sound

Andrew Johnson Bank

Greeneville, TN
5
Star Rating
Greeneville, TN-based Andrew Johnson Bank is an FDIC-insured bank started in 1975. Regulatory filings show the bank having equity of $36.0 million on $359.3 million in assets, as of December 31, 2017.

With 97 full-time employees in 8 offices in TN, the bank holds loans and leases worth $290.0 million, including real estate loans of $271.1 million. U.S. bank customers currently have $304.7 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is key. It acts as a cushion against losses and as protection for accountholders when a bank is experiencing economic trouble. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Andrew Johnson Bank received a score of 12 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Andrew Johnson Bank's Tier 1 capital ratio was 13.43 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, Andrew Johnson Bank held equity amounting to 10.02 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these kinds of assets may eventually have to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Andrew Johnson Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.38 percent of Andrew Johnson 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 1.01 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 at-risk loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Andrew Johnson Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Andrew Johnson Bank scored 18 out of a possible 30, better than the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Andrew Johnson Bank's most recent annualized quarterly return on equity was 9.16 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.2 million on total equity of $36.0 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.