Safe and Sound

The Watkins Savings Bank

Watkins, IA
5
Star Rating
The Watkins Savings Bank is a Watkins, IA-based, FDIC-insured bank that opened its doors in 1892. As of December 31, 2017, the bank held equity of $11.3 million on $70.3 million in assets.

Thanks to the efforts of 7 full-time employees, the bank has amassed loans and leases worth $27.7 million, $15.7 million of which are for real estate. The bank currently holds $56.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Watkins Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of 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

Capital works as a cushion against losses and affords protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial resilience, capital is key. From a safety and soundness perspective, more capital is better.

On our test to measure the adequacy of a bank's capital, The Watkins Savings Bank scored 24 out of a possible 30 points, exceeding the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The Watkins Savings Bank's Tier 1 capital ratio was 31.18 percent, above the 6 percent level regulators consider adequate, and exceeding 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, The Watkins Savings Bank held equity amounting to 16.05 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these kinds of assets suggests a bank may eventually have to use capital to cover losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the risk of a future failure.

The Watkins Savings Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

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, none of The Watkins Savings 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The Watkins Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand financial trouble. Obviously, banks that are losing money are less able to do those things.

The Watkins Savings Bank beat the national average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for The Watkins Savings Bank was 7.19 percent, below the national average of 8.10 percent.

The bank reported net income of $815,000 on total equity of $11.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.17 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.