Safe and Sound

American Bank

Bozeman, MT
5
Star Rating
American Bank is a Bozeman, MT-based, FDIC-insured bank founded in 1970. The bank has equity of $43.0 million on assets of $406.7 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 70 full-time employees in 6 offices in MT, the bank currently holds loans and leases worth $265.5 million, including $211.0 million worth of real estate loans. The bank currently holds $357.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, American 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 key criteria Bankrate used to score U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors during times of economic trouble for the bank. It follows then that when it comes to measuring an a bank's financial fortitude, capital is crucial. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, American Bank received a score of 12 out of a possible 30 points, less than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. American Bank's Tier 1 capital ratio was 14.20 percent, above the 6 percent level regulators consider adequate, but under 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, American Bank held equity amounting to 10.58 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets may eventually be required to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

American Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

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, 0.62 percent of American 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on American Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

American Bank beat the national average on Bankrate's earnings test, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for American Bank was 14.92 percent, above the national average of 8.10 percent.

The bank earned net income of $6.0 million on total equity of $43.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.55 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.