Safe and Sound

1st Bank

Broadus, MT
5
Star Rating
Broadus, MT-based 1st Bank is an FDIC-insured bank started in 1975. As of June 30, 2017, the bank held equity of $6.0 million on assets of $47.6 million.

Thanks to the work of 9 full-time employees, the bank holds loans and leases worth $25.4 million, including $6.7 million worth of real estate loans. The bank currently holds $41.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, 1st Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial strength. It works as a bulwark against losses and affords protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.
1st Bank beat out the national average of 13.38 points on our test to measure capital adequacy, scoring 16 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. 1st Bank's Tier 1 capital ratio was 20.16 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, 1st Bank held equity amounting to 12.64 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these kinds of assets may eventually force a bank to use capital to absorb losses, reducing its buffer 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, decreasing earnings and increasing the chances of a failure in the future.

1st Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, none of 1st 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 1.04 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the how large that reserve is to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on 1st Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance 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 more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

1st Bank beat the national average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. 1st Bank's most recent annualized quarterly return on equity was 12.04 percent, above the national average of 9.28 percent.

The bank recorded net income of $360,000 on total equity of $6.0 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 1.46 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.