Safe and Sound

Security Bank

New Auburn, WI
4
Star Rating
New Auburn, WI-based Security Bank is an FDIC-insured bank founded in 1907. As of December 31, 2017, the bank held equity of $12.5 million on $99.4 million in assets.

U.S. bank customers have $86.0 million on deposit at 4 offices in WI run by 20 full-time employees. With that footprint, the bank has amassed loans and leases worth $79.2 million, including $59.5 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Security 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 key criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial fortitude. It acts as a bulwark against losses and provides protection for accountholders when a bank is experiencing financial trouble. When it comes to safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Security Bank scored 16 out of a possible 30 points, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Security Bank's Tier 1 capital ratio was 14.57 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Security Bank held equity amounting to 12.54 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having extensive holdings of these types of assets means a bank could eventually have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and increasing the chances of a failure in the future.

Security Bank scored 36 out of a possible 40 points on Bankrate's asset quality test, coming in below 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, 1.90 percent of Security Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Security Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, potentially 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 test of earnings, Security Bank scored 16 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. Security Bank's most recent annualized quarterly return on equity was 7.30 percent, below the national average of 8.10 percent.

The bank recorded net income of $897,000 on total equity of $12.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.93 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.