Safe and Sound

The Western State Bank

Garden City, KS
5
Star Rating
The Western State Bank is a Garden City, KS-based, FDIC-insured bank founded in 1973. As of December 31, 2017, the bank had equity of $52.1 million on assets of $476.9 million.

U.S. bank customers have $424.0 million on deposit at 10 offices in KS run by 106 full-time employees. With that footprint, the bank currently holds loans and leases worth $296.3 million, $166.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, The Western State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders when a bank is experiencing financial trouble. It follows then that a bank's level of capital is an important measurement of an institution's financial strength. When it comes to safety and soundness, the more capital, the better.

The Western State Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Western State Bank's Tier 1 capital ratio was 15.07 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, The Western State Bank held equity amounting to 10.93 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

A bank with a large number of these kinds of assets may eventually be required to use capital to absorb losses, shrinking its equity buffer. 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 reduced earnings and potentially more risk of a failure in the future.

The Western State 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 widely used indicator of asset quality.As of December 31, 2017, 0.74 percent of The Western State Bank's loans were noncurrent, meaning 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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Western State 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 cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. Losses, on the other hand, reduce a bank's ability to do those things.

The Western State Bank scored 24 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The Western State Bank's most recent annualized quarterly return on equity was 15.26 percent, above the national average of 8.10 percent.

The bank reported net income of $7.8 million on total equity of $52.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.81 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.