Safe and Sound

WEX Bank

Midvale, UT
5
Star Rating
WEX Bank is an FDIC-insured bank started in 1998 and currently based in Midvale, UT. As of December 31, 2017, the bank had equity of $304.5 million on $2.67 billion in assets.

With 41 full-time employees, the bank currently holds loans and leases worth $2.03 billion, including real estate loans of $1.8 million. U.S. bank customers currently have $1.97 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, WEX Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for depositors during periods of financial trouble for the bank. Therefore, a bank's level of capital is an important measurement of an institution's financial fortitude. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, WEX Bank achieved a score of 14 out of a possible 30 points, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. WEX Bank's Tier 1 capital ratio was 12.89 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, WEX Bank held equity amounting to 11.38 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

Having large numbers of these kinds of assets could eventually require a bank to use capital to absorb losses, diminishing 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 lower earnings and potentially more risk of a failure in the future.

WEX Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, 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, 1.11 percent of WEX Bank's loans were noncurrent, meaning 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 maintain 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 at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on WEX Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, WEX Bank scored 30 out of a possible 30, exceeding the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. WEX Bank's most recent annualized quarterly return on equity was 75.32 percent, above the national average of 8.10 percent.

The bank reported net income of $212.7 million on total equity of $304.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 9.04 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.