Safe and Sound

American Bank, National Association

Waco, TX
5
Star Rating
American Bank, National Association is a Waco, TX-based, FDIC-insured bank dating back to 1982. Regulatory filings show the bank having equity of $42.3 million on assets of $433.8 million, as of December 31, 2017.

U.S. bank customers have $380.1 million on deposit at 3 offices in TX run by 85 full-time employees. With that footprint, the bank currently holds loans and leases worth $318.8 million, including $252.6 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, American Bank, National Association 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 grade 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 provides protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial fortitude, capital is valuable. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, American Bank, National Association received a score of 10 out of a possible 30 points, less than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. American Bank, National Association's Tier 1 capital ratio was 13.90 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, American Bank, National Association held equity amounting to 9.75 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets means a bank could eventually have to use capital to cover losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and increasing the risk of a future failure.

On Bankrate's asset quality test, American Bank, National Association scored 40 out of a possible 40 points, better than 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, 0.23 percent of American Bank, 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 1.01 percent.

Banks keep 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 widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on American Bank, National Association's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's test of earnings, American Bank, National Association scored 22 out of a possible 30, exceeding the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. American Bank, National Association's most recent annualized quarterly return on equity was 12.62 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $5.3 million on total equity of $42.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.20 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.