Safe and Sound

BankSouth

Dothan, AL
5
Star Rating
Founded in 1928, BankSouth is an FDIC-insured bank headquartered in Dothan, AL. The bank holds equity of $35.0 million on $169.4 million in assets, according to December 31, 2017, regulatory filings.

With 24 full-time employees in 2 offices in AL, the bank has amassed loans and leases worth $137.5 million, including real estate loans of $117.3 million. U.S. bank customers currently have $133.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, BankSouth exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is important. It acts as a bulwark against losses and affords protection for depositors during periods of financial instability for the bank. When it comes to safety and soundness, more capital is preferred.

BankSouth did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 30 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. BankSouth's Tier 1 capital ratio was 30.93 percent, higher than the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial downturns.

Overall, BankSouth held equity amounting to 20.68 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

Having a large number of these types 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 money, resulting in lower earnings and potentially more risk of a failure in the future.

BankSouth scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

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, none of BankSouth'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on BankSouth's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand economic shocks. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's earnings test, BankSouth scored 14 out of a possible 30, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. BankSouth's most recent annualized quarterly return on equity was 6.20 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.2 million on total equity of $35.0 million. The bank had an annualized return on average assets, or ROA, of 1.29 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.