Safe and Sound

Southern Bank

Sardis, GA
2
Star Rating
Sardis, GA-based Southern Bank is an FDIC-insured bank started in 1945. Regulatory filings show the bank having equity of $9.1 million on assets of $80.9 million, as of December 31, 2017.

U.S. bank customers have $71.5 million on deposit at 5 offices in GA run by 29 full-time employees. With that footprint, the bank currently holds loans and leases worth $49.0 million, including $41.4 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Southern Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to score American banks.

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 struggling financially. It follows then that a bank's level of capital is an essential measurement of a bank's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

Southern Bank racked up 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Southern Bank's Tier 1 capital ratio was 17.81 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Southern Bank held equity amounting to 11.31 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 past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets could eventually force a bank to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a failure in the future.

On Bankrate's asset quality test, Southern Bank scored 24 out of a possible 40 points, less than the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.44 percent of Southern 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Southern Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand economic shocks. However, banks that are losing money are less able to do those things.

Southern Bank scored 4 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. Southern Bank's most recent annualized quarterly return on equity was 1.93 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $178,000 on total equity of $9.1 million. The bank had an annualized return on average assets, or ROA, of 0.22 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.