Safe and Sound

Independence Bank

Havre, MT
5
Star Rating
Independence Bank is an FDIC-insured bank started in 1973 and currently headquartered in Havre, MT. The bank holds equity of $90.0 million on assets of $714.6 million, according to December 31, 2017, regulatory filings.

With 99 full-time employees in 7 offices in MT, the bank holds loans and leases worth $560.7 million, including real estate loans of $399.4 million. U.S. bank customers currently have $607.7 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders during periods of financial instability for the bank. Therefore, when it comes to measuring an an institution's financial resilience, capital is important. When looking at safety and soundness, the higher the capital, the better.

Independence Bank achieved a score of 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Independence Bank's Tier 1 capital ratio was 14.46 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, Independence Bank held equity amounting to 12.59 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled 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 could eventually have to use capital to absorb losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, Independence Bank scored 40 out of a possible 40 points, beating 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, 0.10 percent of Independence 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 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 problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Independence Bank's loan loss allowance was 1,325.94 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

Independence Bank outperformed the average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for Independence Bank was 11.96 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $10.4 million on total equity of $90.0 million. The bank had an annualized return on average assets, or ROA, of 1.55 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.