Safe and Sound

Bank of Montana

Missoula, MT
5
Star Rating
Missoula, MT-based Bank of Montana is an FDIC-insured bank started in 2007. Regulatory filings show the bank having equity of $8.3 million on $82.8 million in assets, as of December 31, 2017.

With 11 full-time employees, the bank currently holds loans and leases worth $64.2 million, including real estate loans of $42.3 million. U.S. bank customers currently have $73.3 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors when a bank is experiencing economic instability. It follows then that a bank's level of capital is an important measurement of an institution's financial strength. From a safety and soundness perspective, the higher the capital, the better.

Bank of Montana received a score of 12 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Bank of Montana's Tier 1 capital ratio was 14.35 percent, exceeding 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 weather financial challenges.

Overall, Bank of Montana held equity amounting to 10.03 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 effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these types of assets means a bank may have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

Bank of Montana did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

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 Montana'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 handle problem 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 helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Bank of Montana's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

Bank of Montana outperformed the average on Bankrate's earnings test, achieving a score of 30 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Bank of Montana's most recent annualized quarterly return on equity was 46.65 percent, above the national average of 8.10 percent.

The bank reported net income of $3.6 million on total equity of $8.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 4.67 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.