Safe and Sound

Security State Bank

Alexandria, SD
5
Star Rating
Security State Bank is an FDIC-insured bank started in 1946 and currently based in Alexandria, SD. As of December 31, 2017, the bank had equity of $8.3 million on $80.2 million in assets.

U.S. bank customers have $71.8 million on deposit at 3 offices in SD run by 15 full-time employees. With that footprint, the bank currently holds loans and leases worth $53.2 million, including $6.2 million worth of real estate loans.

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. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to score U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is essential. It acts as a bulwark against losses and as protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

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

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 14.25 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, Security State Bank held equity amounting to 10.32 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 mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these types of assets could eventually be forced to use capital to absorb losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.29 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 below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Security State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial trouble. Obviously, banks that are losing money have less ability to do those things.

Security State Bank scored 18 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Security State Bank's most recent annualized quarterly return on equity was 9.64 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $793,000 on total equity of $8.3 million. The bank reported an annualized return on average assets, or ROA, of 1.04 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.