Safe and Sound

Bank of Washington

Washington, MO
3
Star Rating
Founded in 1877, Bank of Washington is an FDIC-insured bank based in Washington, MO. Regulatory filings show the bank having equity of $80.4 million on assets of $636.1 million, as of December 31, 2017.

U.S. bank customers have $507.9 million on deposit at 6 offices in MO run by 118 full-time employees. With that footprint, the bank has amassed loans and leases worth $498.7 million, including real estate loans of $361.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Washington exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is crucial. It acts as a cushion against losses and affords protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

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

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Bank of Washington's Tier 1 capital ratio was 13.02 percent, exceeding 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, Bank of Washington held equity amounting to 12.64 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 problem assets, such as past-due loans.

Having a large number of these kinds of assets could eventually force a bank to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, Bank of Washington scored 12 out of a possible 40 points, lower than the national average of 37.49 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, 7.46 percent of Bank of Washington'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 problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bank of Washington's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money 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 prepared to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Bank of Washington scored 18 out of a possible 30, better than the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Bank of Washington's most recent annualized quarterly return on equity was 8.49 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $6.6 million on total equity of $80.4 million. The bank experienced an annualized return on average assets, or ROA, of 1.06 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.