Safe and Sound

SouthPoint Bank

Birmingham, AL
5
Star Rating
SouthPoint Bank is a Birmingham, AL-based, FDIC-insured bank founded in 2005. The bank holds equity of $27.2 million on $297,994,000 in assets, according to June 30, 2017, regulatory filings.

Thanks to the work of 74 full-time employees in 4 offices in AL, the bank currently holds loans and leases worth $230.2 million, including $173.3 million worth of real estate loans. The bank currently holds $256.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, SouthPoint Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three key criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial strength. It acts as a cushion against losses and as protection for accountholders during times of financial instability for the bank. When it comes to safety and soundness, the higher the capital, the better.
SouthPoint Bank fell below the national average of 13.38 on our test to measure capital adequacy, racking up 10 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. SouthPoint Bank's Tier 1 capital ratio was 10.38 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, SouthPoint Bank held equity amounting to 9.13 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets suggests a bank may eventually have to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 0.13 percent of SouthPoint 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 1.04 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the how large that reserve is to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. SouthPoint Bank's loan loss allowance was 1,142.62 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic shocks. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, SouthPoint Bank scored 24 out of a possible 30, exceeding the national average of 16.52.

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. SouthPoint Bank's most recent annualized quarterly return on equity was 15.25 percent, above the national average of 9.28 percent.

The bank earned net income of $2.0 million on total equity of $27.2 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 1.37 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.