Safe and Sound

Security State Bank

Centralia, WA
5
Star Rating
Centralia, WA-based Security State Bank is an FDIC-insured bank started in 1903. As of December 31, 2017, the bank held equity of $54.0 million on $449.6 million in assets.

Thanks to the efforts of 106 full-time employees in 12 offices in WA, the bank currently holds loans and leases worth $209.6 million, $161.2 million of which are for real estate. The bank currently holds $388.5 million in deposits from U.S. customers.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors during periods of financial trouble for the bank. It follows then that a bank's level of capital is a crucial measurement of an institution's financial fortitude. When it comes to safety and soundness, the higher the capital, the better.

Security State Bank did better than the national average of 13.13 points on our test to measure capital adequacy, scoring 14 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's Tier 1 capital ratio was 21.90 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, Security State Bank held equity amounting to 12.02 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 problem assets, such as past-due loans.

Having lots of these types of assets may eventually force a bank to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

Security State Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, lower than the national average of 37.49.

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, 1.28 percent of Security State 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used 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 State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand financial trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Security State Bank received above-average marks on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Security State Bank's most recent annualized quarterly return on equity was 12.18 percent, above the national average of 8.10 percent.

The bank earned net income of $6.2 million on total equity of $54.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.45 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.