Safe and Sound

Tennessee State Bank

Pigeon Forge, TN
4
Star Rating
Pigeon Forge, TN-based Tennessee State Bank is an FDIC-insured bank started in 1972. The bank holds equity of $68.8 million on assets of $647.1 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $571.9 million on deposit at 16 offices in TN run by 202 full-time employees. With that footprint, the bank holds loans and leases worth $449.5 million, including real estate loans of $417.0 million.

Overall, Bankrate believes that, as of December 31, 2017, Tennessee State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors during periods of economic instability for the bank. It follows then that when it comes to measuring an an institution's financial fortitude, capital is crucial. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, Tennessee State Bank received a score of 12 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Tennessee State Bank's Tier 1 capital ratio was 14.67 percent, higher than the 6 percent level regulators consider adequate, 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 challenges.

Overall, Tennessee State Bank held equity amounting to 10.64 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 effect of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having lots of these kinds of assets may eventually require a bank to use capital to absorb losses, shrinking 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, decreasing earnings and elevating the chances of a future failure.

On Bankrate's asset quality test, Tennessee State Bank scored 32 out of a possible 40 points, failing to reach 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, 0.90 percent of Tennessee State Bank'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 to handle 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 handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Tennessee State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand economic trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Tennessee State Bank exceeded the national average on Bankrate's earnings test, achieving a score of 16 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Tennessee State Bank was 8.25 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $5.5 million on total equity of $68.8 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.