Safe and Sound

Bank of South Texas

Mcallen, TX
4
Star Rating
Mcallen, TX-based Bank of South Texas is an FDIC-insured bank founded in 1986. Regulatory filings show the bank having equity of $13.9 million on assets of $129.5 million, as of December 31, 2017.

Thanks to the efforts of 47 full-time employees in 6 offices in TX, the bank has amassed loans and leases worth $97.6 million, $87.3 million of which are for real estate. The bank currently holds $115.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Bank of South Texas exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

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

Bank of South Texas received a score of 8 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Bank of South Texas's Tier 1 capital ratio was 10.99 percent, above the 6 percent level regulators consider adequate, but under 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 South Texas held equity amounting to 10.76 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

Having large numbers of these kinds of assets means a bank may eventually have to use capital to cover losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Bank of South Texas scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

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, 0.24 percent of Bank of South Texas'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 problem assets . Comparing the reserve's size to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bank of South Texas's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's earnings test, Bank of South Texas scored 16 out of a possible 30, beating the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. Bank of South Texas's most recent annualized quarterly return on equity was 7.29 percent, below the national average of 8.10 percent.

The bank earned net income of $980,000 on total equity of $13.9 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.76 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.