Safe and Sound

Bank3

3
Star Rating
Bank3 is an FDIC-insured bank started in 1910 and currently based in Memphis, TN. As of December 31, 2017, the bank had equity of $22.8 million on $139.1 million in assets.

With 27 full-time employees in 4 offices in TN, the bank has amassed loans and leases worth $90.9 million, including real estate loans of $61.9 million. U.S. bank customers currently have $114.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank3 exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial resilience. It acts as a cushion against losses and provides protection for depositors when a bank is experiencing financial trouble. From a safety and soundness perspective, the more capital, the better.

Bank3 achieved a score of 24 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Bank3's Tier 1 capital ratio was 20.17 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Bank3 held equity amounting to 16.38 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these types of assets could eventually force a bank to use capital to cover losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Bank3 scored 40 out of a possible 40 points, beating the national average of 37.49 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, none of Bank3'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 keep 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 problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Bank3's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with 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.

Bank3 received below-average marks on Bankrate's earnings test, achieving a score of 0 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Bank3 was -13.00 percent, below the national average of 8.10 percent.

The bank recorded net income of $-3.1 million on total equity of $22.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of -3.16 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.