Safe and Sound

The Eastern Colorado Bank

Cheyenne Wells, CO
5
Star Rating
Started in 1944, The Eastern Colorado Bank is an FDIC-insured bank based in Cheyenne Wells, CO. As of December 31, 2017, the bank had equity of $42.2 million on $385.4 million in assets.

With 70 full-time employees in 6 offices in multiple states, the bank currently holds loans and leases worth $271.0 million, including real estate loans of $169.6 million. U.S. bank customers currently have $323.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Eastern Colorado Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important 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 cushion against losses and affords protection for depositors when a bank is experiencing financial instability. It follows then that when it comes to measuring an a bank's financial resilience, capital is essential. When looking at safety and soundness, the more capital, the better.

The Eastern Colorado Bank finished 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.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Eastern Colorado Bank's Tier 1 capital ratio was 13.24 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 downturns.

Overall, The Eastern Colorado Bank held equity amounting to 10.94 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets could eventually have to use capital to cover losses, cutting down on 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.

The Eastern Colorado Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

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, none of The Eastern Colorado 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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The Eastern Colorado Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

The Eastern Colorado Bank scored 24 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for The Eastern Colorado Bank was 16.42 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $6.7 million on total equity of $42.2 million. The bank reported an annualized return on average assets, or ROA, of 1.77 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.