Safe and Sound

Security Federal Bank

Aiken, SC
4
Star Rating
Started in 1922, Security Federal Bank is an FDIC-insured bank headquartered in Aiken, SC. The bank holds equity of $92.4 million on assets of $868.7 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 216 full-time employees in 15 offices in multiple states, the bank holds loans and leases worth $390.5 million, including $352.5 million worth of real estate loans. The bank currently holds $707.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Security Federal Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial resilience. It works as a cushion against losses and affords protection for depositors when a bank is experiencing economic trouble. From a safety and soundness perspective, the higher the capital, the better.

Security Federal Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Security Federal Bank's Tier 1 capital ratio was 17.66 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Security Federal Bank held equity amounting to 10.64 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

A bank with lots of these types of assets could eventually be required to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.43 percent of Security Federal 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 problem assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Security Federal Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, likely making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

Security Federal Bank scored 16 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Security Federal Bank's most recent annualized quarterly return on equity was 7.09 percent, below the national average of 8.10 percent.

The bank earned net income of $6.5 million on total equity of $92.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.77 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.