Safe and Sound

Bank of DeSoto, National Association

De Soto, TX
5
Star Rating
Bank of DeSoto, National Association is an FDIC-insured bank started in 1986 and currently headquartered in De Soto, TX. As of December 31, 2017, the bank had equity of $20.1 million on assets of $190.8 million.

Thanks to the efforts of 40 full-time employees, the bank currently holds loans and leases worth $113.3 million, including $69.7 million worth of real estate loans. U.S. bank customers currently have $170.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of DeSoto, 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 key 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 acts as a buffer against losses and provides protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a useful measurement of a bank's financial strength. From a safety and soundness perspective, more capital is preferred.

Bank of DeSoto, National Association received a score of 12 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of DeSoto, National Association's Tier 1 capital ratio was 16.25 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Bank of DeSoto, National Association held equity amounting to 10.54 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 troubled assets, such as unpaid loans.

A bank with lots of these types of assets may eventually be required 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 money, resulting in depressed earnings and potentially more risk of a failure in the future.

Bank of DeSoto, National Association scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.96 percent of Bank of DeSoto, National Association'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of DeSoto, National Association's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. Banks that are losing money, however, are less able to do those things.

Bank of DeSoto, National Association outperformed the average on Bankrate's test of earnings, achieving a score of 28 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. Bank of DeSoto, National Association's most recent annualized quarterly return on equity was 18.53 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.7 million on total equity of $20.1 million. The bank experienced an annualized return on average assets, or ROA, of 1.87 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.