Safe and Sound

Magnolia State Bank

Bay Springs, MS
4
Star Rating
Magnolia State Bank is a Bay Springs, MS-based, FDIC-insured bank that opened its doors in 1975. As of December 31, 2017, the bank held equity of $31.6 million on assets of $325.8 million.

U.S. bank customers have $293.5 million on deposit at 8 offices in MS run by 96 full-time employees. With that footprint, the bank has amassed loans and leases worth $254.8 million, including $211.2 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Magnolia State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is important. It works as a bulwark against losses and as protection for depositors during times of economic instability for the bank. When looking at safety and soundness, more capital is preferred.

Magnolia State Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Magnolia State Bank's Tier 1 capital ratio was 12.29 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Magnolia State Bank held equity amounting to 9.69 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

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

On Bankrate's test of asset quality, Magnolia State Bank scored 36 out of a possible 40 points, falling short of the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.44 percent of Magnolia State 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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a widely used 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 Magnolia State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

Magnolia State Bank received below-average marks on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Magnolia State Bank was 6.26 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.0 million on total equity of $31.6 million. The bank reported an annualized return on average assets, or ROA, of 0.62 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.