Safe and Sound

Terrabank, National Association

Miami, FL
4
Star Rating
Started in 1985, Terrabank, National Association is an FDIC-insured bank headquartered in Miami, FL. Regulatory filings show the bank having equity of $33.9 million on assets of $390.1 million, as of June 30, 2017.

U.S. bank customers have $350.6 million on deposit at 3 offices in FL run by 93 full-time employees. With that footprint, the bank holds loans and leases worth $249.5 million, $245.5 million of which are for real estate.

Overall, Bankrate believes that, as of June 30, 2017, Terrabank, National Association exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three important criteria Bankrate used to evaluate U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for accountholders when a bank is experiencing economic trouble. Therefore, a bank's level of capital is a crucial measurement of a bank's financial strength. From a safety and soundness perspective, the higher the capital, the better.
Terrabank, National Association received a score of 8 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.38.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Terrabank, National Association's Tier 1 capital ratio was 12.81 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.16 percent. A higher capital ratio means the bank will be better able to stand up to financial challenges.

Overall, Terrabank, National Association held equity amounting to 8.69 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

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

A bank with a large number of these kinds of assets may eventually have to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

Terrabank, National Association beat out the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.03 percent of Terrabank, National Association'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 to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Terrabank, National Association's loan loss allowance was 3,498.73 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Terrabank, National Association scored 12 out of a possible 30, lower than the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) 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 Terrabank, National Association was 5.63 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $930,000 on total equity of $33.9 million. The bank reported an annualized return on average assets, or ROA, of 0.50 percent, below the 1 percent deemed satisfactory in accordance with industry standards and 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.