Safe and Sound

First State Bank of the South, Inc.

Sulligent, AL
5
Star Rating
Founded in 1973, First State Bank of the South, Inc. is an FDIC-insured bank based in Sulligent, AL. As of December 31, 2017, the bank had equity of $15.6 million on $99.9 million in assets.

Thanks to the work of 46 full-time employees in 5 offices in AL, the bank holds loans and leases worth $34.9 million, including real estate loans of $19.7 million. The bank currently holds $82.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of the South, Inc. 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 key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is important. It works as a cushion against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

First State Bank of the South, Inc. achieved a score of 22 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First State Bank of the South, Inc.'s Tier 1 capital ratio was 25.39 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 State Bank of the South, Inc. held equity amounting to 15.58 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these kinds of assets could eventually have to use capital to cover losses, shrinking its equity buffer. 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, diminishing earnings and increasing the risk of a failure in the future.

First State Bank of the South, Inc. exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.55 percent of First State Bank of the South, Inc.'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 handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First State Bank of the South, Inc.'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, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial trouble. Conversely, losses diminish a bank's ability to do those things.

First State Bank of the South, Inc. fell behind the national average on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

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. The most recent annualized quarterly return on equity for First State Bank of the South, Inc. was 3.79 percent, below the national average of 8.10 percent.

The bank earned net income of $600,000 on total equity of $15.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.60 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.