Safe and Sound

Southwest Capital Bank

Albuquerque, NM
3
Star Rating
Southwest Capital Bank is an FDIC-insured bank founded in 1890 and currently headquartered in Albuquerque, NM. As of December 31, 2017, the bank held equity of $35.9 million on assets of $384.6 million.

With 102 full-time employees in 6 offices in NM, the bank holds loans and leases worth $263.9 million, including real estate loans of $217.2 million. U.S. bank customers currently have $339.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Southwest Capital Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial strength. It acts as a bulwark against losses and provides protection for accountholders when a bank is experiencing financial trouble. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Southwest Capital Bank received a score of 10 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Southwest Capital Bank's Tier 1 capital ratio was 12.18 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Southwest Capital Bank held equity amounting to 9.33 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these kinds of assets may eventually force a bank to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Southwest Capital Bank scored 20 out of a possible 40 points, lower than the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.50 percent of Southwest Capital Bank's loans were noncurrent -- in other words, 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 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 problem assets. Unfortunately, the FDIC did not provide information on Southwest Capital Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand financial trouble. Obviously, banks that are losing money have less ability to do those things.

Southwest Capital Bank scored 22 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Southwest Capital Bank's most recent annualized quarterly return on equity was 12.40 percent, above the national average of 8.10 percent.

The bank earned net income of $4.4 million on total equity of $35.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.22 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.