Safe and Sound

Southern Bank

Poplar Bluff, MO
4
Star Rating
Southern Bank is an FDIC-insured bank founded in 1887 and currently based in Poplar Bluff, MO. The bank holds equity of $172.2 million on assets of $1.70 billion, according to June 30, 2017, regulatory filings.

U.S. bank customers have $1.47 billion on deposit at 46 offices in multiple states run by 328 full-time employees. With that footprint, the bank holds loans and leases worth $1.40 billion, $1.15 billion of which are for real estate.

Overall, Bankrate believes that, as of June 30, 2017, Southern Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank faired on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors when a bank is experiencing financial instability. It follows then that when it comes to measuring an an institution's financial resilience, capital is important. When it comes to safety and soundness, the more capital, the better.
Southern Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.38.

One important measure of this buffer is a bank's Tier 1 capital ratio. Southern Bank's Tier 1 capital ratio was 11.05 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, Southern Bank held equity amounting to 10.13 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by problem assets, such as past-due mortgages.

Having extensive holdings of these types of assets means a bank could have to use capital to cover losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

Southern Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 0.23 percent of Southern 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 1.04 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Southern Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Southern Bank scored 18 out of a possible 30, better than the national average of 16.52.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Southern Bank was 11.08 percent, above the national average of 9.28 percent.

The bank reported net income of $8.3 million on total equity of $172.2 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 1.06 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 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.