Safe and Sound

Frontier Bank

Lamar, CO
5
Star Rating
Frontier Bank is a Lamar, CO-based, FDIC-insured bank started in 1934. As of December 31, 2017, the bank had equity of $31.8 million on $300.7 million in assets.

With 60 full-time employees in 8 offices in CO, the bank currently holds loans and leases worth $158.1 million, including real estate loans of $125.3 million. U.S. bank customers currently have $268.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Frontier 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 evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is important. It works as a buffer against losses and affords protection for depositors during periods of financial instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

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

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Frontier Bank's Tier 1 capital ratio was 17.13 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 weather economic headwinds.

Overall, Frontier Bank held equity amounting to 10.56 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to absorb 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.

On Bankrate's asset quality test, Frontier Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.

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, 0.01 percent of Frontier 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Frontier Bank's loan loss allowance was 20,221.05 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand financial trouble. Banks that are losing money, however, have less ability to do those things.

Frontier Bank did above-average on Bankrate's earnings test, achieving a score of 26 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important measure of a bank's earnings. Frontier Bank's most recent annualized quarterly return on equity was 17.13 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $5.5 million on total equity of $31.8 million. The bank experienced an annualized return on average assets, or ROA, of 1.91 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.