Safe and Sound

Texas Heritage Bank

Boerne, TX
4
Star Rating
Boerne, TX-based Texas Heritage Bank is an FDIC-insured bank founded in 1931. As of December 31, 2017, the bank held equity of $12.4 million on assets of $150.0 million.

U.S. bank customers have $110.9 million on deposit at 3 offices in TX run by 33 full-time employees. With that footprint, the bank has amassed loans and leases worth $119.2 million, including $99.9 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Texas Heritage Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial strength. It acts as a buffer against losses and as protection for accountholders during times of economic instability for the bank. When looking at safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, Texas Heritage Bank received a score of 8 out of a possible 30 points, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Texas Heritage Bank's Tier 1 capital ratio was 10.70 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, Texas Heritage Bank held equity amounting to 8.28 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets may eventually force a bank to use capital to cover losses, cutting down on its buffer 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, resulting in lower earnings and potentially more risk of a future failure.

Texas Heritage Bank finished below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.10 percent of Texas Heritage 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Texas Heritage 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. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

Texas Heritage Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. Texas Heritage Bank's most recent annualized quarterly return on equity was 6.11 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $749,000 on total equity of $12.4 million. The bank experienced an annualized return on average assets, or ROA, of 0.52 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.