Safe and Sound

Bank of Texas

Midland, TX
5
Star Rating
Midland, TX-based Bank of Texas is an FDIC-insured bank started in 1962. Regulatory filings show the bank having equity of $37.2 million on $350.0 million in assets, as of December 31, 2017.

With 19 full-time employees in 4 offices in TX, the bank holds loans and leases worth $265.9 million, including real estate loans of $177.7 million. U.S. bank customers currently have $295.9 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is useful. It works as a cushion against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Bank of Texas received a score of 12 out of a possible 30 points, below the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Bank of Texas's Tier 1 capital ratio was 12.70 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, Bank of Texas held equity amounting to 10.63 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets may eventually be forced to use capital to absorb losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the risk of a failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Bank of 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 to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of Texas's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Bank of Texas scored 26 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Bank of Texas was 16.77 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $6.0 million on total equity of $37.2 million. The bank reported an annualized return on average assets, or ROA, of 1.98 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.