Safe and Sound

State Bank of Texas

Dallas, TX
5
Star Rating
Founded in 1987, State Bank of Texas is an FDIC-insured bank based in Dallas, TX. As of December 31, 2017, the bank had equity of $150.3 million on $839.6 million in assets.

U.S. bank customers have $684.1 million on deposit at 6 offices in multiple states run by 132 full-time employees. With that footprint, the bank holds loans and leases worth $589.2 million, $575.1 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, State Bank of Texas 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 key criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is important. It acts as a cushion against losses and affords protection for depositors during times of economic instability for the bank. When it comes to safety and soundness, more capital is preferred.

State Bank of Texas did better than the national average of 13.13 points on our test to measure capital adequacy, scoring 26 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. State Bank of Texas's Tier 1 capital ratio was 22.50 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, State Bank of Texas held equity amounting to 17.89 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

Having lots of these kinds of assets could eventually force a bank to use capital to absorb losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a failure in the future.

State Bank of Texas scored 36 out of a possible 40 points on Bankrate's test of asset quality, failing to reach the national average of 37.49.

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, 1.48 percent of State Bank of Texas'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on State Bank of Texas's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with 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.

State Bank of Texas outperformed the average on Bankrate's test of earnings, achieving a score of 30 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. State Bank of Texas's most recent annualized quarterly return on equity was 45.65 percent, above the national average of 8.10 percent.

The bank reported net income of $70.3 million on total equity of $150.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 8.33 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.