Safe and Sound

Bank of Bozeman

Bozeman, MT
4
Star Rating
Bank of Bozeman is a Bozeman, MT-based, FDIC-insured bank dating back to 2005. The bank holds equity of $7.1 million on assets of $69.1 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 22 full-time employees, the bank has amassed loans and leases worth $55.3 million, including $46.7 million worth of real estate loans. U.S. bank customers currently have $61.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Bozeman exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial resilience, capital is crucial. When looking at safety and soundness, more capital is better.

Bank of Bozeman fell below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Bank of Bozeman's Tier 1 capital ratio was 11.86 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Bank of Bozeman held equity amounting to 10.30 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

Having lots of these types of assets means a bank could eventually have to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, none of Bank of Bozeman'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 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 problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Bank of Bozeman's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Bank of Bozeman scored 12 out of a possible 30, less than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Bank of Bozeman was 5.26 percent, below the national average of 8.10 percent.

The bank reported net income of $365,000 on total equity of $7.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.53 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.