Safe and Sound

Independent Bank

Memphis, TN
4
Star Rating
Independent Bank is an FDIC-insured bank started in 1998 and currently based in Memphis, TN. As of December 31, 2017, the bank had equity of $120.4 million on $1.00 billion in assets.

Thanks to the efforts of 217 full-time employees in 10 offices in multiple states, the bank currently holds loans and leases worth $796.2 million, including $162.7 million worth of real estate loans. U.S. bank customers currently have $850.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Independent Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is important. It works as a cushion against losses and affords protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, the higher the capital, the better.

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

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Independent Bank's Tier 1 capital ratio was 11.07 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Independent Bank held equity amounting to 11.98 percent of its assets, which was lower than the national average of 12.03 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 unpaid loans.

Having lots of these kinds of assets suggests a bank may have to use capital to absorb losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Independent Bank scored 36 out of a possible 40 points, coming in below the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.94 percent of Independent Bank'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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Independent Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Independent Bank scored 14 out of a possible 30, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Independent Bank's most recent annualized quarterly return on equity was 7.19 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $8.4 million on total equity of $120.4 million. The bank had an annualized return on average assets, or ROA, of 0.84 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.