Safe and Sound

Security State Bank

Pearsall, TX
5
Star Rating
Pearsall, TX-based Security State Bank is an FDIC-insured bank founded in 1925. The bank has equity of $59.0 million on assets of $613.7 million, according to December 31, 2017, regulatory filings.

With 80 full-time employees in 6 offices in TX, the bank currently holds loans and leases worth $335.1 million, including real estate loans of $285.9 million. U.S. bank customers currently have $534.1 million in deposits with the bank.

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 did on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial resilience. It acts as a bulwark against losses and provides protection for depositors during periods of financial trouble for the bank. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Security State Bank received a score of 10 out of a possible 30 points, failing to reach the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Security State Bank's Tier 1 capital ratio was 13.63 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Security State Bank held equity amounting to 9.62 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 impact of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these types of assets suggests a bank may have to use capital to cover losses, decreasing its equity buffer. It also means that there are likely to be many assets that are 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.

On Bankrate's asset quality test, Security State 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 useful indicator of asset quality.As of December 31, 2017, 0.01 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 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 helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Security State Bank's loan loss allowance was 2,342.11 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand financial trouble. Obviously, banks that are losing money are less able to do those things.

Security State Bank exceeded the national average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Security State Bank was 12.82 percent, above the national average of 8.10 percent.

The bank reported net income of $7.4 million on total equity of $59.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.26 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.