Safe and Sound

Southwestern National Bank

Houston, TX
5
Star Rating
Houston, TX-based Southwestern National Bank is an FDIC-insured bank started in 1997. The bank holds equity of $48.1 million on $396.1 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $332.3 million on deposit at 6 offices in multiple states run by 91 full-time employees. With that footprint, the bank currently holds loans and leases worth $243.3 million, $242.6 million of which are for real estate.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is crucial. It acts as a cushion against losses and provides protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

Southwestern National Bank achieved a score of 16 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Southwestern National Bank's Tier 1 capital ratio was 16.71 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 economic headwinds.

Overall, Southwestern National Bank held equity amounting to 12.15 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these types of assets could eventually be forced to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, none of Southwestern 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Southwestern National Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand financial shocks. However, banks that are losing money are less able to do those things.

Southwestern National Bank scored 18 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Southwestern National Bank was 10.00 percent, above the national average of 8.10 percent.

The bank earned net income of $4.7 million on total equity of $48.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.26 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.