Safe and Sound

Western State Bank

Devils Lake, ND
4
Star Rating
Western State Bank is an FDIC-insured bank started in 1902 and currently headquartered in Devils Lake, ND. As of December 31, 2017, the bank held equity of $105.0 million on $1.04 billion in assets.

U.S. bank customers have $914.2 million on deposit at 12 offices in multiple states run by 207 full-time employees. With that footprint, the bank holds loans and leases worth $898.0 million, $433.0 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Western State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors during times of financial trouble for the bank. It follows then that a bank's level of capital is an essential measurement of a bank's financial fortitude. When it comes to safety and soundness, more capital is better.

On our test to measure capital adequacy, Western State Bank received a score of 12 out of a possible 30 points, falling short of the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Western State Bank's Tier 1 capital ratio was 11.08 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Western State Bank held equity amounting to 10.05 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Western State Bank finished below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

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

Earnings score

How profitable a bank is has an effect on its long-term survivability. 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 shocks. Obviously, banks that are losing money have less ability to do those things.

Western State Bank scored 20 out of a possible 30 on Bankrate's test of earnings, better than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Western State Bank was 11.11 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $11.4 million on total equity of $105.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.13 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.