Safe and Sound

Security State Bank & Trust

Fredericksburg, TX
5
Star Rating
Fredericksburg, TX-based Security State Bank & Trust is an FDIC-insured bank founded in 1941. As of December 31, 2017, the bank had equity of $131.3 million on assets of $977.8 million.

Thanks to the efforts of 293 full-time employees in 20 offices in TX, the bank holds loans and leases worth $622.1 million, including real estate loans of $476.2 million. U.S. bank customers currently have $795.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Security State Bank & Trust exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for depositors when a bank is experiencing economic instability. It follows then that when it comes to measuring an an institution's financial resilience, capital is useful. When looking at safety and soundness, the higher the capital, the better.

Security State Bank & Trust did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 18 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Security State Bank & Trust's Tier 1 capital ratio was 18.58 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Security State Bank & Trust held equity amounting to 13.43 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 loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets may eventually force a bank to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, diminishing earnings and increasing the chances of a failure in the future.

Security State Bank & Trust beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.91 percent of Security State Bank & Trust'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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Security State Bank & Trust'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, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, diminish a bank's ability to do those things.

Security State Bank & Trust did above-average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Security State Bank & Trust was 12.65 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $16.0 million on total equity of $131.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.67 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.