In late June, 2023, Dallas-based NexBank Capital, Inc. had its A- credit rating affirmed and given a stable outlook by Egan-Jones Rating Company. NexBank Capital, Inc is the parent company to NexBank, the largest privately held bank in Texas with assets totaling $15.2bn. NexBank's operations span institutional, commercial, and mortgage banking. Given the recent turmoil surrounding regional banks, this is a rare piece of good news. 

The A- rating, which is classified as investment-grade, is applied to the company's senior unsecured debt. Additional ratings, all of which are considered investment-grade, are shown below:

  • Subordinated Debt: BBB+
  • Preferred Equity: BBB
  • Company/Bank: A-

Egan-Jones' report also included the following stable outlook: "The Company's A- rating is consistent with the implied credit metrics in fiscal 2022 and forward-looking 2023 and 2024."

Regional banks like NexBank are often a key resource for both CRE investors and homebuyers. Since the collapse of Silicon Valley Bank and First Republic Bank, there has been great unease regarding the entire sector. For SVB and FRB, hindsight has shown there were structural flaws that left those banks vulnerable, specifically to interest rate risk. Regardless, the threat of contagion remains looming over the entire sector. The reaffirming of investment grade status for NexBank should hopefully ease some of the tension for both regional bank investors and clients.

Too-big-to-fail banks, while very stable, struggle to form the local connections that regional banks are able to cultivate. In a relationship-based industry such as CRE, these regional banks are the bread and butter of financing. The reaffirmed investment grade status should, in an ideal world, put depositors at ease and allow for outside capital to be raised at a lower cost. This is good news for investors looking to borrow.

Reaffirmed credit ratings and stable outlooks aren't exactly sexy front-page news like a bank collapse. However, savvy investors should keep an eye on sentiment regarding capital sources. Risk and uncertainty remain persistent in this market, with volatile interest rates and increased loan defaults, especially on office buildings, posing threats to stability. Despite these headwinds, there is hope for light at the end of the tunnel.

Just don't put half a billion dollars in a single bank account!