Safe and Sound

1st Bank

Broadus, MT
5
Star Rating
Broadus, MT-based 1st Bank is an FDIC-insured bank founded in 1975. The bank holds equity of $6.4 million on $51.0 million in assets, according to December 31, 2017, regulatory filings.

With 9 full-time employees, the bank has amassed loans and leases worth $22.1 million, including real estate loans of $6.7 million. U.S. bank customers currently have $44.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, 1st Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors when a bank is experiencing financial instability. It follows then that a bank's level of capital is a key measurement of a bank's financial fortitude. When looking at safety and soundness, the more capital, the better.

1st Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, racking up 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. 1st Bank's Tier 1 capital ratio was 25.92 percent, above the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, 1st Bank held equity amounting to 12.53 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate 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 large numbers of these kinds of assets means a bank may have to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a future failure.

On Bankrate's asset quality test, 1st Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.04 percent 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 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. 1st Bank's loan loss allowance was 5,550.00 percent of its total noncurrent loans, exceeding the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

1st Bank scored 22 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. 1st Bank's most recent annualized quarterly return on equity was 12.73 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $777,000 on total equity of $6.4 million. The bank experienced an annualized return on average assets, or ROA, of 1.59 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.