Safe and Sound

Security Federal Savings Bank

Jasper, AL
4
Star Rating
Security Federal Savings Bank is a Jasper, AL-based, FDIC-insured bank that opened its doors in 1970. The bank holds equity of $4.5 million on assets of $39.2 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 13 full-time employees, the bank currently holds loans and leases worth $14.7 million, $11.1 million of which are for real estate. The bank currently holds $29.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Security Federal Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial strength, capital is essential. When looking at safety and soundness, the higher the capital, the better.

Security Federal Savings Bank beat out the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Security Federal Savings Bank's Tier 1 capital ratio was 20.38 percent, exceeding 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 weather economic challenges.

Overall, Security Federal Savings Bank held equity amounting to 11.51 percent of its assets, which was lower than 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 loans, on the bank's loan loss reserves and overall capitalization.

Having lots of these kinds of assets could eventually force a bank to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Security Federal Savings Bank scored 40 out of a possible 40 points, beating the national average of 37.49 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, none of Security Federal Savings Bank'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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Security Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Security Federal Savings Bank scored 8 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Security Federal Savings Bank was 3.21 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $144,000 on total equity of $4.5 million. The bank had an annualized return on average assets, or ROA, of 0.36 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.