Safe and Sound

Prairie Mountain Bank

Great Falls, MT
4
Star Rating
Great Falls, MT-based Prairie Mountain Bank is an FDIC-insured bank founded in 2002. As of December 31, 2017, the bank had equity of $8.9 million on $90.7 million in assets.

With 29 full-time employees in 2 offices in MT, the bank holds loans and leases worth $62.4 million, including real estate loans of $50.6 million. U.S. bank customers currently have $80.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Prairie Mountain Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders during times of economic trouble for the bank. Therefore, a bank's level of capital is an essential measurement of a bank's financial fortitude. When it comes to safety and soundness, the higher the capital, the better.

Prairie Mountain Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Prairie Mountain Bank's Tier 1 capital ratio was 13.98 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, Prairie Mountain Bank held equity amounting to 9.84 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

A bank with lots of these kinds of assets could eventually have to use capital to cover losses, shrinking 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 diminished earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, none of Prairie Mountain 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 deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Prairie Mountain Bank's loan loss allowance was 157,300.00 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

Prairie Mountain Bank scored 18 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Prairie Mountain Bank's most recent annualized quarterly return on equity was 10.45 percent, above the national average of 8.10 percent.

The bank earned net income of $888,000 on total equity of $8.9 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.97 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.