Safe and Sound

Extraco Banks, National Association

Temple, TX
4
Star Rating
Extraco Banks, National Association is a Temple, TX-based, FDIC-insured bank that opened its doors in 1933. The bank holds equity of $140.6 million on assets of $1.41 billion, according to December 31, 2017, regulatory filings.

U.S. bank customers have $1.13 billion on deposit at 17 offices in TX run by 358 full-time employees. With that footprint, the bank has amassed loans and leases worth $876.1 million, $724.4 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Extraco Banks, National Association exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for account holders when a bank is experiencing economic trouble. It follows then that a bank's level of capital is an essential measurement of a bank's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

Extraco Banks, National Association received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Extraco Banks, National Association's Tier 1 capital ratio was 15.42 percent, higher than 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 stand up to financial headwinds.

Overall, Extraco Banks, National Association held equity amounting to 10.00 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

A bank with extensive holdings of these types of assets could eventually be required to use capital to absorb losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, reducing earnings and elevating the risk of a failure in the future.

Extraco Banks, National Association scored 40 out of a possible 40 points on Bankrate's asset quality test, better than 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, 0.19 percent of Extraco Banks, 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 . Comparing how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Extraco Banks, National Association's loan loss allowance was 1,288.39 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses diminish a bank's ability to do those things.

Extraco Banks, National Association scored 18 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Extraco Banks, National Association's most recent annualized quarterly return on equity was 9.01 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $12.5 million on total equity of $140.6 million. The bank had an annualized return on average assets, or ROA, of 0.90 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.