Safe and Sound

SmartBank

Pigeon Forge, TN
4
Star Rating
SmartBank is an FDIC-insured bank started in 2007 and currently headquartered in Pigeon Forge, TN. As of December 31, 2017, the bank held equity of $168.1 million on assets of $1.68 billion.

With 343 full-time employees in 24 offices in multiple states, the bank has amassed loans and leases worth $1.32 billion, including real estate loans of $1.07 billion. U.S. bank customers currently have $1.44 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, SmartBank 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 important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors when a bank is experiencing economic trouble. Therefore, when it comes to measuring an an institution's financial strength, capital is crucial. From a safety and soundness perspective, more capital is preferred.

SmartBank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. SmartBank's Tier 1 capital ratio was 10.90 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, SmartBank held equity amounting to 10.01 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

A bank with large numbers of these types of assets could eventually be forced to use capital to absorb losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

SmartBank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.25 percent of SmartBank'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 to deal with problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on SmartBank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on 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 better prepared to withstand economic shocks. Banks that are losing money, however, are less able to do those things.

SmartBank scored 10 out of a possible 30 on Bankrate's earnings test, failing to reach the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. SmartBank's most recent annualized quarterly return on equity was 5.69 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $7.1 million on total equity of $168.1 million. The bank had an annualized return on average assets, or ROA, of 0.59 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.