Safe and Sound

Premier Bank of the South

Cullman, AL
5
Star Rating
Premier Bank of the South is an FDIC-insured bank started in 1987 and currently based in Cullman, AL. Regulatory filings show the bank having equity of $16.5 million on $174.0 million in assets, as of December 31, 2017.

Thanks to the work of 66 full-time employees in 9 offices in AL, the bank has amassed loans and leases worth $122.5 million, including $90.5 million worth of real estate loans. The bank currently holds $156.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Premier Bank of the South exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors when a bank is experiencing financial instability. It follows then that when it comes to measuring an a bank's financial strength, capital is important. When it comes to safety and soundness, more capital is better.

Premier Bank of the South received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Premier Bank of the South's Tier 1 capital ratio was 13.70 percent, above 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 stand up to financial downturns.

Overall, Premier Bank of the South held equity amounting to 9.48 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, diminishing its buffer 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.

Premier Bank of the South scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.15 percent of Premier Bank of the South'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Premier Bank of the South's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Premier Bank of the South scored 20 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Premier Bank of the South's most recent annualized quarterly return on equity was 11.78 percent, above the national average of 8.10 percent.

The bank reported net income of $1.9 million on total equity of $16.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.09 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.