Safe and Sound

Frost Bank

San Antonio, TX
4
Star Rating
Frost Bank is a San Antonio, TX-based, FDIC-insured bank founded in 1899. Regulatory filings show the bank having equity of $3.27 billion on $31.80 billion in assets, as of December 31, 2017.

Thanks to the efforts of 4,270 full-time employees in 146 offices in TX, the bank has amassed loans and leases worth $12.99 billion, including real estate loans of $6.32 billion. U.S. bank customers currently have $26.95 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Frost Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is valuable. It works as a buffer against losses and as protection for accountholders when a bank is experiencing economic instability. When looking at safety and soundness, the more capital, the better.

Frost Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Frost Bank's Tier 1 capital ratio was 12.92 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Frost Bank held equity amounting to 10.27 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

A bank with extensive holdings of these kinds of assets could eventually have to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and increasing the risk of a failure in the future.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.25 percent of Frost Bank'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 to handle problem 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 Frost Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

Frost Bank did above-average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Frost Bank was 11.97 percent, above the national average of 8.10 percent.

The bank earned net income of $371.1 million on total equity of $3.27 billion for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.21 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.