Safe and Sound

South Sound Bank

Olympia, WA
5
Star Rating
Olympia, WA-based South Sound Bank is an FDIC-insured bank founded in 2000. Regulatory filings show the bank having equity of $23.9 million on assets of $170.5 million, as of December 31, 2017.

With 33 full-time employees in 2 offices in WA, the bank has amassed loans and leases worth $120.4 million, including real estate loans of $103.5 million. U.S. bank customers currently have $144.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, South Sound 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 grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

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

South Sound Bank scored above 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.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. South Sound Bank's Tier 1 capital ratio was 16.68 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, South Sound Bank held equity amounting to 14.03 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these types of assets may eventually have to use capital to cover losses, reducing 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 money, decreasing earnings and increasing the risk of a future failure.

On Bankrate's asset quality test, South Sound Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.

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, 0.10 percent of South Sound 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size 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. South Sound Bank's loan loss allowance was 1,573.39 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

South Sound Bank scored 12 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. South Sound Bank's most recent annualized quarterly return on equity was 5.89 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.4 million on total equity of $23.9 million. The bank experienced an annualized return on average assets, or ROA, of 0.81 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.