Safe and Sound

Watertown Savings Bank

Watertown, NY
4
Star Rating
Watertown Savings Bank is an FDIC-insured bank founded in 1894 and currently headquartered in Watertown, NY. The bank holds equity of $94.3 million on $652.6 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 115 full-time employees in 10 offices in NY, the bank has amassed loans and leases worth $420.1 million, $376.1 million of which are for real estate. U.S. bank customers currently have $545.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Watertown Savings Bank exhibited a good condition, earning 4 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 evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial stability, capital is key. From a safety and soundness perspective, the higher the capital, the better.

Watertown Savings Bank achieved a score of 16 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Watertown Savings Bank's Tier 1 capital ratio was 16.71 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, Watertown Savings Bank held equity amounting to 14.45 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

Having extensive holdings of these types of assets means a bank could eventually have to use capital to cover losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, reducing earnings and increasing the chances of a failure in the future.

Watertown Savings Bank fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.31 percent of Watertown Savings Bank's loans were noncurrent, meaning 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 deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful 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 Watertown Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's test of earnings, Watertown Savings Bank scored 12 out of a possible 30, lower than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Watertown Savings Bank's most recent annualized quarterly return on equity was 5.40 percent, below the national average of 8.10 percent.

The bank recorded net income of $5.0 million on total equity of $94.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.77 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.