Safe and Sound

Wellington State Bank

Wellington, TX
5
Star Rating
Wellington, TX-based Wellington State Bank is an FDIC-insured bank started in 1906. The bank holds equity of $45.3 million on $396.7 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 112 full-time employees in 10 offices in TX, the bank holds loans and leases worth $227.9 million, $117.2 million of which are for real estate. The bank currently holds $347.0 million in deposits from U.S. customers.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is a crucial measurement of an institution's financial resilience. When it comes to safety and soundness, more capital is preferred.

Wellington State Bank scored below the national average of 13.13 on our test to measure capital adequacy, racking up 12 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Wellington State Bank's Tier 1 capital ratio was 14.83 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic difficulties.

Overall, Wellington State Bank held equity amounting to 11.42 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these types of assets may eventually force a bank to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, diminishing earnings and elevating the chances of a future failure.

Wellington State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.70 percent of Wellington 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Wellington 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. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial trouble. Conversely, losses reduce a bank's ability to do those things.

Wellington State Bank scored 18 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

One important measure of 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 Wellington State Bank was 8.21 percent, above the national average of 8.10 percent.

The bank earned net income of $3.6 million on total equity of $45.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.91 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.