Safe and Sound

West Texas State Bank

Odessa, TX
4
Star Rating
Started in 1937, West Texas State Bank is an FDIC-insured bank based in Odessa, TX. Regulatory filings show the bank having equity of $45.2 million on $398.5 million in assets, as of December 31, 2017.

Thanks to the efforts of 100 full-time employees in 8 offices in TX, the bank holds loans and leases worth $202.0 million, including $126.9 million worth of real estate loans. U.S. bank customers currently have $352.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, West Texas State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is valuable. It works as a bulwark against losses and affords protection for depositors when a bank is experiencing economic instability. When looking at safety and soundness, the higher the capital, the better.

West Texas State Bank scored above the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 14 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. West Texas State Bank's Tier 1 capital ratio was 16.99 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, West Texas State Bank held equity amounting to 11.35 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 problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets could eventually require a bank to use capital to cover losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.

West Texas State Bank finished below the national average of 37.49 on Bankrate's asset quality test, racking up 28 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 5.91 percent of West Texas State Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on West Texas State Bank'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, giving a boost to its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

West Texas State Bank scored 14 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. West Texas State Bank's most recent annualized quarterly return on equity was 6.85 percent, below the national average of 8.10 percent.

The bank recorded net income of $3.0 million on total equity of $45.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.76 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.