Safe and Sound

Welch State Bank of Welch, Okla.

Welch, OK
5
Star Rating
Welch, OK-based Welch State Bank of Welch, Okla. is an FDIC-insured bank founded in 1923. The bank holds equity of $32.9 million on $278.1 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $243.7 million on deposit at 4 offices in OK run by 70 full-time employees. With that footprint, the bank has amassed loans and leases worth $184.8 million, including real estate loans of $121.5 million.

Overall, Bankrate believes that, as of December 31, 2017, Welch State Bank of Welch, Okla. exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial strength. It acts as a buffer against losses and provides protection for depositors when a bank is experiencing financial instability. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Welch State Bank of Welch, Okla. scored 14 out of a possible 30 points, beating out the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Welch State Bank of Welch, Okla.'s Tier 1 capital ratio was 16.24 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Welch State Bank of Welch, Okla. held equity amounting to 11.83 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

Having lots of these types of assets could eventually require a bank to use capital to absorb losses, cutting down on 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, resulting in depressed earnings and potentially more risk of a failure in the future.

Welch State Bank of Welch, Okla. scored 40 out of a possible 40 points on Bankrate's asset quality test, above 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, 0.53 percent of Welch State Bank of Welch, Okla.'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 the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Welch State Bank of Welch, Okla.'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, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

Welch State Bank of Welch, Okla. did above-average on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Welch State Bank of Welch, Okla. was 13.56 percent, above the national average of 8.10 percent.

The bank reported net income of $4.4 million on total equity of $32.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.67 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.