Safe and Sound

Southern Bank and Trust Company

Mount Olive, NC
5
Star Rating
Mount Olive, NC-based Southern Bank and Trust Company is an FDIC-insured bank founded in 1901. As of December 31, 2017, the bank had equity of $268.8 million on assets of $2.58 billion.

Thanks to the efforts of 546 full-time employees in 61 offices in multiple states, the bank holds loans and leases worth $1.62 billion, including $1.36 billion worth of real estate loans. U.S. bank customers currently have $2.25 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Southern Bank and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is experiencing economic trouble. Therefore, a bank's level of capital is a key measurement of an institution's financial fortitude. When it comes to safety and soundness, the higher the capital, the better.

Southern Bank and Trust Company finished below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Southern Bank and Trust Company's Tier 1 capital ratio was 12.29 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, Southern Bank and Trust Company held equity amounting to 10.42 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

A bank with large numbers of these kinds of assets could eventually have to use capital to absorb losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and increasing the chances of a future failure.

Southern Bank and Trust Company scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.52 percent of Southern Bank and Trust Company'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 troubled assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Southern Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Southern Bank and Trust Company scored 20 out of a possible 30 on Bankrate's test of earnings, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Southern Bank and Trust Company's most recent annualized quarterly return on equity was 10.94 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $27.7 million on total equity of $268.8 million. The bank reported an annualized return on average assets, or ROA, of 1.10 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.