Safe and Sound

Advantage Bank

Loveland, CO
5
Star Rating
Started in 2000, Advantage Bank is an FDIC-insured bank headquartered in Loveland, CO. As of December 31, 2017, the bank had equity of $31.3 million on assets of $300.4 million.

U.S. bank customers have $245.3 million on deposit at 4 offices in CO run by 39 full-time employees. With that footprint, the bank has amassed loans and leases worth $246.4 million, including $214.2 million worth of real estate loans.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors during times of financial trouble for the bank. Therefore, when it comes to measuring an an institution's financial strength, capital is useful. When it comes to safety and soundness, the higher the capital, the better.

Advantage Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Advantage Bank's Tier 1 capital ratio was 12.98 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, Advantage Bank held equity amounting to 10.40 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 impact of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these types of assets could eventually have to use capital to absorb losses, decreasing its equity buffer. 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 future failure.

Advantage Bank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.17 percent of Advantage 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." Comparing the size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Advantage Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

Advantage Bank scored 22 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Advantage Bank was 13.94 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $4.1 million on total equity of $31.3 million. The bank had an annualized return on average assets, or ROA, of 1.41 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.