Safe and Sound

Western Bank

Lubbock, TX
4
Star Rating
Western Bank is an FDIC-insured bank started in 1909 and currently based in Lubbock, TX. Regulatory filings show the bank having equity of $18.8 million on assets of $227.2 million, as of December 31, 2017.

With 59 full-time employees in 6 offices in TX, the bank holds loans and leases worth $150.2 million, including real estate loans of $112.0 million. U.S. bank customers currently have $207.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Western Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial resilience. It works as a cushion against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Western Bank received a score of 8 out of a possible 30 points, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Western Bank's Tier 1 capital ratio was 11.48 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Western Bank held equity amounting to 8.30 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets could eventually force a bank to use capital to cover losses, diminishing its equity buffer. 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, resulting in reduced earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.05 percent of Western Bank's loans were noncurrent -- in other words, 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 problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Western Bank's loan loss allowance was 1,896.34 percent of its total noncurrent loans, exceeding the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand economic shocks. However, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Western Bank scored 20 out of a possible 30, beating out the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. Western Bank's most recent annualized quarterly return on equity was 11.22 percent, above the national average of 8.10 percent.

The bank earned net income of $2.2 million on total equity of $18.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.96 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.