Safe and Sound

Security Bank of Southwest Missouri

Cassville, MO
5
Star Rating
Cassville, MO-based Security Bank of Southwest Missouri is an FDIC-insured bank founded in 1985. Regulatory filings show the bank having equity of $9.6 million on assets of $82.5 million, as of December 31, 2017.

Thanks to the work of 29 full-time employees in 3 offices in MO, the bank has amassed loans and leases worth $60.4 million, $45.1 million of which are for real estate. U.S. bank customers currently have $72.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Security Bank of Southwest Missouri 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 evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial strength. It works as a buffer against losses and as protection for accountholders during periods of financial instability for the bank. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Security Bank of Southwest Missouri racked up 14 out of a possible 30 points, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Security Bank of Southwest Missouri's Tier 1 capital ratio was 22.58 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, Security Bank of Southwest Missouri held equity amounting to 11.61 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

Security Bank of Southwest Missouri fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.49 percent of Security Bank of Southwest Missouri's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to deal with troubled 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 useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Security Bank of Southwest Missouri's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, Security Bank of Southwest Missouri scored 28 out of a possible 30, beating the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Security Bank of Southwest Missouri was 19.29 percent, above the national average of 8.10 percent.

The bank earned net income of $1.8 million on total equity of $9.6 million for the twelve months ended December 31, 2017. The bank had 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.