Safe and Sound

Southwest Bank

Fort Worth, TX
4
Star Rating
Southwest Bank is an FDIC-insured bank founded in 1963 and currently based in Fort Worth, TX. The bank has equity of $538.7 million on $2.89 billion in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 313 full-time employees in 17 offices in TX, the bank holds loans and leases worth $2.40 billion, including real estate loans of $1.76 billion. U.S. bank customers currently have $1.83 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Southwest Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is crucial. It acts as a cushion against losses and provides protection for depositors during periods of economic instability for the bank. From a safety and soundness perspective, the higher the capital, the better.

Southwest Bank achieved a score of 14 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Southwest Bank's Tier 1 capital ratio was 10.94 percent, exceeding the 6 percent level regulators consider adequate, but lower 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, Southwest Bank held equity amounting to 18.66 percent of its assets, which exceeded 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 mortgages.

A bank with large numbers of these types of assets could eventually be forced to use capital to cover losses, shrinking its cushion of equity. 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, pushing down earnings and elevating the chances of a future failure.

On Bankrate's asset quality test, Southwest Bank scored 40 out of a possible 40 points, beating out 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, 0.01 percent of Southwest Bank'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 deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Southwest Bank's loan loss allowance was 1,231.18 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, Southwest Bank scored 4 out of a possible 30, less than the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Southwest Bank's most recent annualized quarterly return on equity was 1.67 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $5.7 million on total equity of $538.7 million. The bank reported an annualized return on average assets, or ROA, of 0.24 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.