Safe and Sound

Western States Bank

Laramie, WY
4
Star Rating
Western States Bank is a Laramie, WY-based, FDIC-insured bank founded in 2006. The bank holds equity of $53.7 million on assets of $491.8 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 123 full-time employees in 14 offices in multiple states, the bank currently holds loans and leases worth $379.2 million, including real estate loans of $287.8 million. U.S. bank customers currently have $437.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Western States Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is key. It acts as a bulwark against losses and provides protection for accountholders during periods of economic instability for the bank. When looking at safety and soundness, more capital is better.

Western States Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Western States Bank's Tier 1 capital ratio was 12.71 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, Western States Bank held equity amounting to 10.91 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 loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these types of assets means a bank could eventually have to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Western States Bank scored 36 out of a possible 40 points, failing to reach the national average of 37.49 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, 1.05 percent of Western States 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 problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Western States Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, Western States Bank scored 16 out of a possible 30, above the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Western States Bank was 7.38 percent, below the national average of 8.10 percent.

The bank recorded net income of $3.9 million on total equity of $53.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.80 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.