Safe and Sound

First Southern State Bank

Stevenson, AL
5
Star Rating
Founded in 1910, First Southern State Bank is an FDIC-insured bank based in Stevenson, AL. The bank holds equity of $36.8 million on assets of $380.8 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $340.6 million on deposit at 8 offices in AL run by 91 full-time employees. With that footprint, the bank currently holds loans and leases worth $201.8 million, $153.0 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, First Southern State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is important. It acts as a buffer against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

First Southern State Bank scored below the national average of 13.13 on our test to measure capital adequacy, racking up 10 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. First Southern State Bank's Tier 1 capital ratio was 16.43 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, First Southern State Bank held equity amounting to 9.66 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

Having large numbers of these types of assets suggests a bank may eventually have to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, First Southern State Bank scored 40 out of a possible 40 points, beating 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, 0.11 percent of First Southern State 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 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. First Southern State Bank's loan loss allowance was 1,244.91 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's test of earnings, First Southern State Bank scored 20 out of a possible 30, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. First Southern State Bank's most recent annualized quarterly return on equity was 11.10 percent, above the national average of 8.10 percent.

The bank reported net income of $4.0 million on total equity of $36.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.05 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.