Safe and Sound

Southern Bank

Poplar Bluff, MO
5
Star Rating
Southern Bank is an FDIC-insured bank started in 1887 and currently based in Poplar Bluff, MO. As of December 31, 2017, the bank held equity of $179.2 million on assets of $1.77 billion.

Thanks to the efforts of 379 full-time employees in 44 offices in multiple states, the bank currently holds loans and leases worth $1.45 billion, including real estate loans of $1.21 billion. U.S. bank customers currently have $1.52 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Southern Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial strength. It works as a cushion against losses and provides protection for accountholders when a bank is experiencing financial trouble. When looking at safety and soundness, the more capital, the better.

Southern Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Southern Bank's Tier 1 capital ratio was 11.25 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, Southern Bank held equity amounting to 10.13 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these kinds of assets may eventually be forced to use capital to cover losses, diminishing 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, diminishing earnings and elevating the risk of a failure in the future.

On Bankrate's asset quality test, Southern 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 useful indicator of asset quality.As of December 31, 2017, 0.50 percent of Southern 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 to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used 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 Southern Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, Southern Bank scored 20 out of a possible 30, beating out the national average of 15.12.

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. Southern Bank's most recent annualized quarterly return on equity was 11.81 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $19.0 million on total equity of $179.2 million. The bank had an annualized return on average assets, or ROA, of 1.16 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.