Safe and Sound

Welcome State Bank

Welcome, MN
5
Star Rating
Founded in 1913, Welcome State Bank is an FDIC-insured bank based in Welcome, MN. Regulatory filings show the bank having equity of $3.1 million on assets of $33.7 million, as of December 31, 2017.

Thanks to the work of 6 full-time employees, the bank has amassed loans and leases worth $22.3 million, including real estate loans of $10.8 million. The bank currently holds $29.9 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Welcome State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared 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 provides protection for depositors during periods of economic trouble for the bank. It follows then that when it comes to measuring an a bank's financial strength, capital is important. When looking at safety and soundness, more capital is better.

On our test to measure capital adequacy, Welcome State Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Welcome State Bank's Tier 1 capital ratio was 11.66 percent, higher than the 6 percent level considered adequate by regulators, but lower than 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, Welcome State Bank held equity amounting to 9.08 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets could eventually be required to use capital to cover losses, decreasing 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 lower earnings and potentially more risk of a failure in the future.

Welcome State Bank scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

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, none of Welcome 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." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Welcome State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Welcome State Bank exceeded the national average on Bankrate's test of earnings, achieving a score of 30 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Welcome State Bank was 21.22 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $638,000 on total equity of $3.1 million. The bank reported an annualized return on average assets, or ROA, of 2.13 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.