Safe and Sound

First Security Bank of Deer Lodge

Deer Lodge, MT
5
Star Rating
First Security Bank of Deer Lodge is a Deer Lodge, MT-based, FDIC-insured bank started in 1972. As of December 31, 2017, the bank had equity of $3.8 million on $35.6 million in assets.

With 12 full-time employees, the bank holds loans and leases worth $26.3 million, including real estate loans of $19.9 million. U.S. bank customers currently have $31.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Security Bank of Deer Lodge exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders during times of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial strength, capital is essential. From a safety and soundness perspective, the higher the capital, the better.

First Security Bank of Deer Lodge received a score of 12 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. First Security Bank of Deer Lodge's Tier 1 capital ratio was 19.61 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 stand up to economic difficulties.

Overall, First Security Bank of Deer Lodge held equity amounting to 10.52 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 problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these kinds of assets could eventually be required to use capital to absorb losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, First Security Bank of Deer Lodge scored 40 out of a possible 40 points, above the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.01 percent of First Security Bank of Deer Lodge'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 troubled assets . The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. First Security Bank of Deer Lodge's loan loss allowance was 12,800.00 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, First Security Bank of Deer Lodge scored 26 out of a possible 30, beating the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. First Security Bank of Deer Lodge's most recent annualized quarterly return on equity was 16.79 percent, above the national average of 8.10 percent.

The bank recorded net income of $608,000 on total equity of $3.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.75 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.