Safe and Sound

Business Bank of Texas, N.A.

Austin, TX
5
Star Rating
Founded in 2007, Business Bank of Texas, N.A. is an FDIC-insured bank based in Austin, TX. The bank holds equity of $12.2 million on $110.4 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 14 full-time employees, the bank currently holds loans and leases worth $72.1 million, including real estate loans of $55.3 million. The bank currently holds $98.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Business Bank of Texas, N.A. exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial strength. It works as a buffer against losses and affords protection for depositors when a bank is experiencing financial trouble. When looking at safety and soundness, the higher the capital, the better.

Business Bank of Texas, N.A. racked up 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Business Bank of Texas, N.A.'s Tier 1 capital ratio was 15.81 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Business Bank of Texas, N.A. held equity amounting to 11.03 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these types of assets may eventually be forced to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the chances of a failure in the future.

Business Bank of Texas, N.A. scored 36 out of a possible 40 points on Bankrate's test of asset quality, below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.71 percent of Business Bank of Texas, N.A.'s loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a handy 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 Business Bank of Texas, N.A.'s loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, Business Bank of Texas, N.A. scored 20 out of a possible 30, better than the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Business Bank of Texas, N.A. was 11.10 percent, above the national average of 8.10 percent.

The bank earned net income of $1.3 million on total equity of $12.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.14 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.