Safe and Sound

Bank of Frankewing

Frankewing, TN
4
Star Rating
Started in 1920, Bank of Frankewing is an FDIC-insured bank headquartered in Frankewing, TN. As of December 31, 2017, the bank had equity of $28.2 million on $253.9 million in assets.

Thanks to the efforts of 54 full-time employees in 3 offices in TN, the bank currently holds loans and leases worth $190.2 million, $140.8 million of which are for real estate. U.S. bank customers currently have $223.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Frankewing 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 score American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is an essential measurement of a bank's financial fortitude. When it comes to safety and soundness, the higher the capital, the better.

Bank of Frankewing scored 14 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Bank of Frankewing's Tier 1 capital ratio was 14.54 percent, above the 6 percent level considered adequate by regulators, but below 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, Bank of Frankewing held equity amounting to 11.11 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 impact of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

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

Bank of Frankewing scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out the national average of 37.49.

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, 0.11 percent of Bank of Frankewing'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 the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Bank of Frankewing's loan loss allowance was 1,563.51 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Bank of Frankewing fell short of the national average on Bankrate's earnings test, achieving a score of 14 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Bank of Frankewing's most recent annualized quarterly return on equity was 6.87 percent, below the national average of 8.10 percent.

The bank earned net income of $1.9 million on total equity of $28.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.79 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.