Safe and Sound

HomeTrust Bank

Asheville, NC
4
Star Rating
Asheville, NC-based HomeTrust Bank is an FDIC-insured bank started in 1926. As of June 30, 2017, the bank held equity of $363.6 million on assets of $3.19 billion.

With 486 full-time employees in 41 offices in multiple states, the bank currently holds loans and leases worth $2.33 billion, including real estate loans of $1.98 billion. U.S. bank customers currently have $2.07 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, HomeTrust Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to score U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for accountholders during periods of financial instability for the bank. Therefore, a bank's level of capital is an essential measurement of an institution's financial fortitude. When it comes to safety and soundness, the more capital, the better.
On our test to measure the adequacy of a bank's capital, HomeTrust Bank received a score of 12 out of a possible 30 points, failing to reach the national average of 13.38.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. HomeTrust Bank's Tier 1 capital ratio was 11.68 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, HomeTrust Bank held equity amounting to 11.39 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to determine 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 a large number of these kinds of assets could eventually be forced to use capital to cover losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and elevating the risk of a failure in the future.

On Bankrate's asset quality test, HomeTrust Bank scored 40 out of a possible 40 points, beating out the national average of 37.62 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.69 percent of HomeTrust 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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on HomeTrust Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

HomeTrust Bank did below-average on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for HomeTrust Bank was 2.95 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $5.1 million on total equity of $363.6 million. The bank experienced an annualized return on average assets, or ROA, of 0.34 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.