Safe and Sound

Bandera Bank

Bandera, TX
5
Star Rating
Bandera Bank is an FDIC-insured bank founded in 1986 and currently headquartered in Bandera, TX. The bank has equity of $6.8 million on $68.9 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 14 full-time employees, the bank currently holds loans and leases worth $35.4 million, including $30.5 million worth of real estate loans. The bank currently holds $62.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Bandera Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is essential. It acts as a cushion against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

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

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Bandera Bank's Tier 1 capital ratio was 25.21 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Bandera Bank held equity amounting to 9.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these types of assets means a bank may have to use capital to absorb losses, shrinking 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 reduced earnings and potentially more risk of a future failure.

Bandera Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding 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, 0.06 percent of Bandera 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 1.01 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 problem assets, especially when compared to the total amount of at-risk loans. Bandera Bank's loan loss allowance was 1,590.00 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Bandera Bank outperformed the average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. Bandera Bank's most recent annualized quarterly return on equity was 10.74 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $709,000 on total equity of $6.8 million. The bank experienced an annualized return on average assets, or ROA, of 1.10 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.