Safe and Sound

WaterStone Bank, SSB

Wauwatosa, WI
5
Star Rating
WaterStone Bank, SSB is a Wauwatosa, WI-based, FDIC-insured bank that opened its doors in 1921. As of December 31, 2017, the bank had equity of $386.8 million on $1.80 billion in assets.

U.S. bank customers have $1.02 billion on deposit at 13 offices in WI run by 927 full-time employees. With that footprint, the bank currently holds loans and leases worth $1.43 billion, including $1.41 billion worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, WaterStone Bank, SSB exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders during periods of financial instability for the bank. It follows then that when it comes to measuring an a bank's financial resilience, capital is crucial. From a safety and soundness perspective, the higher the capital, the better.

WaterStone Bank, SSB scored above the national average of 13.13 points on our test to measure capital adequacy, scoring 30 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. WaterStone Bank, SSB's Tier 1 capital ratio was 27.92 percent, above the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, WaterStone Bank, SSB held equity amounting to 21.44 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand 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 lots of these kinds of assets suggests a bank may have to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and elevating the risk of a future failure.

WaterStone Bank, SSB beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.42 percent of WaterStone Bank, SSB'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 to handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on WaterStone Bank, SSB's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, WaterStone Bank, SSB scored 14 out of a possible 30, coming in below the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for WaterStone Bank, SSB was 6.79 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $25.9 million on total equity of $386.8 million. The bank had an annualized return on average assets, or ROA, of 1.43 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.