Safe and Sound

Bank of the West

Grapevine, TX
5
Star Rating
Founded in 1986, Bank of the West is an FDIC-insured bank based in Grapevine, TX. The bank holds equity of $43.5 million on assets of $480.6 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 103 full-time employees in 11 offices in TX, the bank has amassed loans and leases worth $309.1 million, $259.7 million of which are for real estate. U.S. bank customers currently have $435.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of the West exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial fortitude, capital is useful. From a safety and soundness perspective, the more capital, the better.

Bank of the West fell below the national average of 13.13 on our test to measure capital adequacy, racking up 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of the West's Tier 1 capital ratio was 13.18 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, Bank of the West held equity amounting to 9.06 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 problem assets, such as past-due loans.

A bank with large numbers of these kinds of assets could eventually be forced to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

Bank of the West beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

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, 0.67 percent of Bank of the West'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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Bank of the West's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Bank of the West was 12.86 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $5.5 million on total equity of $43.5 million. The bank had 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.