Safe and Sound

Southwestern National Bank

Houston, TX
5
Star Rating
Houston, TX-based Southwestern National Bank is an FDIC-insured bank started in 1997. Regulatory filings show the bank having equity of $47.4 million on assets of $369.8 million, as of June 30, 2017.

U.S. bank customers have $307.0 million on deposit at 6 offices in multiple states run by 88 full-time employees. With that footprint, the bank has amassed loans and leases worth $216.5 million, including $217.4 million worth of real estate loans.

Overall, Bankrate believes that, as of June 30, 2017, Southwestern National Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major 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 cushion against losses and affords protection for accountholders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial stability, capital is key. When looking at safety and soundness, the more capital, the better.
Southwestern National Bank did better than the national average of 13.38 points on our test to measure capital adequacy, achieving a score of 16 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Southwestern National Bank's Tier 1 capital ratio was 17.84 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Southwestern National Bank held equity amounting to 12.82 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to try to understand 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 a large number of these kinds of assets could eventually be required to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

Southwestern National Bank did better than the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, none of Southwestern National 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 1.04 percent.

Banks maintain 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 problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Southwestern National Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, potentially making the bank better prepared to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

Southwestern National Bank scored 18 out of a possible 30 on Bankrate's earnings test, beating the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Southwestern National Bank was 8.73 percent, below the national average of 9.28 percent.

The bank recorded net income of $2.0 million on total equity of $47.4 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 1.11 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 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.