Safe and Sound

Veritex Community Bank

Dallas, TX
4
Star Rating
Veritex Community Bank is a Dallas, TX-based, FDIC-insured bank that opened its doors in 2004. The bank has equity of $459.3 million on assets of $2.95 billion, according to December 31, 2017, regulatory filings.

With 318 full-time employees in 24 offices in TX, the bank currently holds loans and leases worth $2.25 billion, including real estate loans of $1.56 billion. U.S. bank customers currently have $2.39 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Veritex Community Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

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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 works as a bulwark against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Veritex Community Bank received a score of 12 out of a possible 30 points, below the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Veritex Community Bank's Tier 1 capital ratio was 10.92 percent, above the 6 percent level considered adequate by regulators, but less 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 challenges.

Overall, Veritex Community Bank held equity amounting to 15.58 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these kinds of assets may eventually force a bank to use capital to cover losses, diminishing 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 lower earnings and potentially more risk of a failure in the future.

Veritex Community Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.02 percent of Veritex Community 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 problem assets . Comparing how large that reserve is to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Veritex Community Bank's loan loss allowance was 2,651.76 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Veritex Community Bank did below-average on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Veritex Community Bank was 6.87 percent, below the national average of 8.10 percent.

The bank reported net income of $18.0 million on total equity of $459.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.91 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.