Safe and Sound

Bank of Tennessee

Kingsport, TN
5
Star Rating
Kingsport, TN-based Bank of Tennessee is an FDIC-insured bank started in 1974. The bank holds equity of $102.7 million on assets of $1.20 billion, according to December 31, 2017, regulatory filings.

U.S. bank customers have $957.4 million on deposit at 25 offices in multiple states run by 280 full-time employees. With that footprint, the bank has amassed loans and leases worth $920.8 million, $786.8 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, 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 important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial fortitude. It acts as a cushion against losses and affords protection for accountholders during times of financial instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

Bank of Tennessee fell below the national average of 13.13 on our test to measure capital adequacy, racking up 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of Tennessee's Tier 1 capital ratio was 11.11 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 weather economic challenges.

Overall, Bank of Tennessee held equity amounting to 8.56 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

A bank with large numbers of these kinds of assets may eventually have to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and elevating the risk of a failure in the future.

Bank of Tennessee scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.78 percent of Bank of Tennessee's loans were noncurrent, meaning 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 to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful 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 Bank of Tennessee's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand financial trouble. Obviously, banks that are losing money are less able to do those things.

Bank of Tennessee outperformed the average on Bankrate's test of earnings, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Bank of Tennessee was 14.87 percent, above the national average of 8.10 percent.

The bank earned net income of $14.5 million on total equity of $102.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.29 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.