Safe and Sound

Security State Bank

Radcliffe, IA
3
Star Rating
Radcliffe, IA-based Security State Bank is an FDIC-insured bank started in 1914. Regulatory filings show the bank having equity of $9.3 million on assets of $98.6 million, as of December 31, 2017.

With 21 full-time employees in 4 offices in IA, the bank holds loans and leases worth $50.9 million, including real estate loans of $28.3 million. U.S. bank customers currently have $89.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Security State Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors during times of financial instability for the bank. Therefore, when it comes to measuring an a bank's financial stability, capital is useful. From a safety and soundness perspective, the more capital, the better.

Security State Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Security State Bank's Tier 1 capital ratio was 16.91 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Security State Bank held equity amounting to 9.40 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these types of assets may eventually have to use capital to absorb losses, reducing its buffer 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 lower earnings and potentially more risk of a future failure.

Security State Bank scored 28 out of a possible 40 points on Bankrate's asset quality test, below the national average of 37.49.

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, 3.94 percent of Security State Bank's loans were noncurrent, meaning 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 to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful 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's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

Security State Bank underperformed the average on Bankrate's earnings test, achieving a score of 12 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Security State Bank's most recent annualized quarterly return on equity was 5.43 percent, below the national average of 8.10 percent.

The bank reported net income of $506,000 on total equity of $9.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.54 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.