Safe and Sound

Security Federal Savings Bank of McMinnville

Mcminnville, TN
4
Star Rating
Mcminnville, TN-based Security Federal Savings Bank of McMinnville is an FDIC-insured bank founded in 1959. As of December 31, 2017, the bank held equity of $20.3 million on $203.5 million in assets.

U.S. bank customers have $178.2 million on deposit at 3 offices in TN run by 53 full-time employees. With that footprint, the bank has amassed loans and leases worth $134.2 million, $96.4 million of which are for real estate.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of an institution's financial strength. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Security Federal Savings Bank of McMinnville received a score of 10 out of a possible 30 points, falling short of the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Security Federal Savings Bank of McMinnville's Tier 1 capital ratio was 15.28 percent, exceeding the 6 percent level regulators consider adequate, 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 headwinds.

Overall, Security Federal Savings Bank of McMinnville held equity amounting to 9.98 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

Having large numbers of these types of assets suggests a bank could have to use capital to absorb 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 no longer earning money, pushing down earnings and elevating the chances of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.41 percent of Security Federal Savings Bank of McMinnville'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Security Federal Savings Bank of McMinnville's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

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

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Security Federal Savings Bank of McMinnville's most recent annualized quarterly return on equity was 7.59 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.5 million on total equity of $20.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.76 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.