Safe and Sound

TrailWest Bank

Lolo, MT
5
Star Rating
Lolo, MT-based TrailWest Bank is an FDIC-insured bank started in 1982. Regulatory filings show the bank having equity of $47.3 million on $508.1 million in assets, as of December 31, 2017.

U.S. bank customers have $397.3 million on deposit at 14 offices in MT run by 150 full-time employees. With that footprint, the bank currently holds loans and leases worth $422.8 million, $350.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, TrailWest Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at 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

When it comes to measuring an an institution's financial strength, capital is crucial. It acts as a cushion against losses and provides protection for accountholders during times of economic instability for the bank. From a safety and soundness perspective, more capital is preferred.

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

One important measure of this buffer is a bank's Tier 1 capital ratio. TrailWest Bank's Tier 1 capital ratio was 11.40 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, TrailWest Bank held equity amounting to 9.31 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets could eventually be required to use capital to absorb losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, TrailWest 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, 0.33 percent of TrailWest 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 troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used 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 TrailWest Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, TrailWest Bank scored 26 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. TrailWest Bank's most recent annualized quarterly return on equity was 17.09 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $7.6 million on total equity of $47.3 million. The bank had an annualized return on average assets, or ROA, of 1.59 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.