Safe and Sound

MidSouth Bank

Dothan, AL
5
Star Rating
Started in 1912, MidSouth Bank is an FDIC-insured bank based in Dothan, AL. Regulatory filings show the bank having equity of $47.1 million on $423.4 million in assets, as of December 31, 2017.

Thanks to the work of 100 full-time employees in 10 offices in multiple states, the bank currently holds loans and leases worth $251.8 million, $202.8 million of which are for real estate. U.S. bank customers currently have $375.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, MidSouth Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important 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 works as a buffer against losses and as protection for account holders during times of financial trouble for the bank. Therefore, when it comes to measuring an an institution's financial fortitude, capital is useful. When it comes to safety and soundness, more capital is better.

MidSouth Bank racked up 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. MidSouth Bank's Tier 1 capital ratio was 15.15 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, MidSouth Bank held equity amounting to 11.11 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets may eventually be forced to use capital to absorb losses, decreasing 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 interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

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

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, 0.07 percent of MidSouth 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 . How large that reserve is 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. MidSouth Bank's loan loss allowance was 2,987.79 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial shocks. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, MidSouth Bank scored 18 out of a possible 30, beating out the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. MidSouth Bank's most recent annualized quarterly return on equity was 8.87 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $4.0 million on total equity of $47.1 million. The bank experienced an annualized return on average assets, or ROA, of 0.97 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.