Safe and Sound

Western Bank

Lordsburg, NM
5
Star Rating
Western Bank is an FDIC-insured bank started in 1907 and currently based in Lordsburg, NM. As of December 31, 2017, the bank had equity of $21.0 million on assets of $179.0 million.

With 52 full-time employees in 5 offices in multiple states, the bank has amassed loans and leases worth $72.5 million, including real estate loans of $49.9 million. U.S. bank customers currently have $154.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Western Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is crucial. It works as a buffer against losses and affords protection for depositors when a bank is experiencing financial instability. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Western Bank scored 14 out of a possible 30 points, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Western Bank's Tier 1 capital ratio was 23.88 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, Western Bank held equity amounting to 11.73 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to absorb losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

Western Bank scored 36 out of a possible 40 points on Bankrate's asset quality test, less than the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.12 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 above the national average of 1.01 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Western Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses diminish a bank's ability to do those things.

Western Bank outperformed the average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Western Bank was 12.53 percent, above the national average of 8.10 percent.

The bank earned net income of $2.7 million on total equity of $21.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.57 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.