Safe and Sound

McClave State Bank

Mcclave, CO
5
Star Rating
Mcclave, CO-based McClave State Bank is an FDIC-insured bank founded in 1920. Regulatory filings show the bank having equity of $4.7 million on $39.9 million in assets, as of December 31, 2017.

With 8 full-time employees, the bank holds loans and leases worth $33.1 million, including real estate loans of $11.9 million. U.S. bank customers currently have $33.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, McClave State 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 evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is essential. It works as a buffer against losses and as protection for depositors during times of financial trouble for the bank. From a safety and soundness perspective, more capital is preferred.

McClave State Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, racking up 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. McClave State Bank's Tier 1 capital ratio was 13.02 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 stand up to financial downturns.

Overall, McClave State Bank held equity amounting to 11.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these types of assets could eventually be forced to use capital to absorb losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.21 percent of McClave State 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 known as an "allowance for loan and lease losses" to deal with problem 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 at-risk loans. Unfortunately, the FDIC did not provide information on McClave State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

McClave State Bank scored 22 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. McClave State Bank's most recent annualized quarterly return on equity was 13.10 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $580,000 on total equity of $4.7 million. The bank had an annualized return on average assets, or ROA, of 1.51 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.