Safe and Sound

Southern Independent Bank

Opp, AL
4
Star Rating
Southern Independent Bank is an Opp, AL-based, FDIC-insured bank started in 2006. As of December 31, 2017, the bank had equity of $24.4 million on assets of $227.1 million.

With 35 full-time employees in 2 offices in AL, the bank holds loans and leases worth $120.8 million, including real estate loans of $79.1 million. U.S. bank customers currently have $179.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Southern Independent Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is experiencing financial instability. Therefore, when it comes to measuring an an institution's financial resilience, capital is useful. When it comes to safety and soundness, more capital is preferred.

Southern Independent Bank scored below the national average of 13.13 on our test to measure capital adequacy, racking up 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Southern Independent Bank's Tier 1 capital ratio was 17.42 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Southern Independent Bank held equity amounting to 10.75 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is 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 past-due loans.

A bank with extensive holdings of these types of assets could eventually be forced to use capital to cover losses, shrinking 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, reducing earnings and increasing the chances of a failure in the future.

Southern Independent Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.84 percent of Southern Independent 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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Southern Independent 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. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial trouble. Conversely, losses diminish a bank's ability to do those things.

Southern Independent Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Southern Independent Bank was 5.31 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.3 million on total equity of $24.4 million. The bank reported an annualized return on average assets, or ROA, of 0.57 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.