Safe and Sound

Security Bank and Trust Company

Paris, TN
5
Star Rating
Paris, TN-based Security Bank and Trust Company is an FDIC-insured bank started in 1905. The bank holds equity of $36.1 million on $352.7 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $305.1 million on deposit at 11 offices in multiple states run by 79 full-time employees. With that footprint, the bank currently holds loans and leases worth $247.5 million, including real estate loans of $170.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Security Bank and Trust Company 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 major criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial stability, capital is crucial. From a safety and soundness perspective, the higher the capital, the better.

Security Bank and Trust Company received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Security Bank and Trust Company's Tier 1 capital ratio was 13.44 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, Security Bank and Trust Company held equity amounting to 10.23 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 problem assets, such as past-due mortgages.

A bank with a large number of these kinds of assets may eventually be required to use capital to absorb losses, reducing 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 money, decreasing earnings and elevating the risk of a future failure.

Security Bank and Trust Company scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

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, 0.37 percent of Security Bank and Trust Company'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 problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Security Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand economic shocks. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's test of earnings, Security Bank and Trust Company scored 28 out of a possible 30, above 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. Security Bank and Trust Company's most recent annualized quarterly return on equity was 21.73 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $7.0 million on total equity of $36.1 million. The bank experienced an annualized return on average assets, or ROA, of 2.16 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.