Safe and Sound

Southwest National Bank

Wichita, KS
5
Star Rating
Wichita, KS-based Southwest National Bank is an FDIC-insured bank started in 1915. Regulatory filings show the bank having equity of $43.0 million on $439.2 million in assets, as of December 31, 2017.

Thanks to the work of 116 full-time employees in 8 offices in KS, the bank currently holds loans and leases worth $367.2 million, including $160.3 million worth of real estate loans. The bank currently holds $381.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Southwest National Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is important. It works as a bulwark against losses and affords protection for accountholders when a bank is experiencing economic instability. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Southwest National Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Southwest National Bank's Tier 1 capital ratio was 11.20 percent, above 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 stand up to financial headwinds.

Overall, Southwest National Bank held equity amounting to 9.80 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

A bank with a large number of these kinds of assets may eventually be required to use capital to cover losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and increasing the chances of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.17 percent of Southwest National 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Southwest National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects 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 more resilient in tough times. Conversely, losses take away from a bank's ability to do those things.

Southwest National Bank exceeded the national average on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Southwest National Bank's most recent annualized quarterly return on equity was 13.27 percent, above the national average of 8.10 percent.

The bank reported net income of $5.6 million on total equity of $43.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.29 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.