Safe and Sound

Wells Fargo Bank South Central, National Association

Houston, TX
5
Star Rating
Houston, TX-based Wells Fargo Bank South Central, National Association is an FDIC-insured bank founded in 1894. The bank holds equity of $1.32 billion on assets of $8.60 billion, according to December 31, 2017, regulatory filings.

With 6 full-time employees, the bank currently holds loans and leases worth $4.77 billion, including real estate loans of $4.78 billion. U.S. bank customers currently have $7.24 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Wells Fargo Bank South Central, National Association exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important 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 cushion against losses and provides protection for account holders when a bank is experiencing financial instability. It follows then that a bank's level of capital is a crucial measurement of an institution's financial strength. From a safety and soundness perspective, the more capital, the better.

Wells Fargo Bank South Central, National Association achieved a score of 22 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Wells Fargo Bank South Central, National Association's Tier 1 capital ratio was 38.24 percent, above the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Wells Fargo Bank South Central, National Association held equity amounting to 15.32 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these types of assets could eventually force a bank to use capital to absorb losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and increasing the chances of a future failure.

On Bankrate's asset quality test, Wells Fargo Bank South Central, National Association scored 40 out of a possible 40 points, beating out the national average of 37.49 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, 1.22 percent of Wells Fargo Bank South Central, National Association's loans were noncurrent -- in other words, 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a useful 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 Wells Fargo Bank South Central, National Association's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand financial trouble. Banks that are losing money, however, are less able to do those things.

Wells Fargo Bank South Central, National Association scored 30 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. Wells Fargo Bank South Central, National Association's most recent annualized quarterly return on equity was 26.76 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $366.5 million on total equity of $1.32 billion. The bank had an annualized return on average assets, or ROA, of 4.18 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.