Safe and Sound

Freedom Bank

Columbia Falls, MT
5
Star Rating
Started in 2005, Freedom Bank is an FDIC-insured bank headquartered in Columbia Falls, MT. The bank holds equity of $7.6 million on assets of $69.5 million, according to December 31, 2017, regulatory filings.

With 16 full-time employees, the bank currently holds loans and leases worth $60.8 million, including real estate loans of $44.5 million. U.S. bank customers currently have $58.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Freedom Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for account holders when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a crucial measurement of an institution's financial strength. When it comes to safety and soundness, the higher the capital, the better.

Freedom Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Freedom Bank's Tier 1 capital ratio was 13.79 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Freedom Bank held equity amounting to 10.94 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these types of assets could eventually be forced to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and increasing the risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.81 percent of Freedom Bank'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 to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Freedom Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Freedom Bank scored 24 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. Freedom Bank's most recent annualized quarterly return on equity was 16.65 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.2 million on total equity of $7.6 million. The bank reported an annualized return on average assets, or ROA, of 1.74 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.