Safe and Sound

Frontier State Bank

2
Star Rating
Oklahoma City, OK-based Frontier State Bank is an FDIC-insured bank founded in 1975. As of December 31, 2017, the bank held equity of $74.6 million on assets of $627.4 million.

With 52 full-time employees, the bank has amassed loans and leases worth $415.5 million, including real estate loans of $296.4 million. U.S. bank customers currently have $406.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Frontier State Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for account holders when a bank is experiencing financial instability. Therefore, when it comes to measuring an a bank's financial fortitude, capital is valuable. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, Frontier State Bank achieved a score of 14 out of a possible 30 points, better than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Frontier State Bank's Tier 1 capital ratio was 15.01 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Frontier State Bank held equity amounting to 11.89 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to absorb losses, cutting down on 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 depressed earnings and potentially more risk of a failure in the future.

Frontier State Bank finished below the national average of 37.49 on Bankrate's test of asset quality, racking up 24 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 6.29 percent of Frontier State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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 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 problem assets. Unfortunately, the FDIC did not provide information on Frontier State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

Frontier State Bank scored 0 out of a possible 30 on Bankrate's earnings test, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Frontier State Bank was -0.08 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $-58,000 on total equity of $74.6 million. The bank reported an annualized return on average assets, or ROA, of -0.01 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.