Safe and Sound

Lone Star Bank

Houston, TX
5
Star Rating
Houston, TX-based Lone Star Bank is an FDIC-insured bank founded in 2006. The bank holds equity of $14.7 million on $121.7 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $105.3 million on deposit at 2 offices in TX run by 25 full-time employees. With that footprint, the bank has amassed loans and leases worth $102.2 million, $96.0 million of which are for real estate.

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

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is crucial. It acts as a buffer against losses and affords protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

Lone Star Bank achieved a score of 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Lone Star Bank's Tier 1 capital ratio was 10.31 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 weather economic downturns.

Overall, Lone Star Bank held equity amounting to 12.11 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets may eventually be forced to use capital to cover losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and elevating the chances of a failure in the future.

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

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, none of Lone Star Bank'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 problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Lone Star Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's test of earnings, Lone Star Bank scored 22 out of a possible 30, better than the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Lone Star Bank's most recent annualized quarterly return on equity was 14.10 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.9 million on total equity of $14.7 million. The bank experienced an annualized return on average assets, or ROA, of 1.63 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.