Safe and Sound

Bank of Hamilton

Hamilton, ND
4
Star Rating
Hamilton, ND-based Bank of Hamilton is an FDIC-insured bank founded in 1886. Regulatory filings show the bank having equity of $2.6 million on assets of $20.8 million, as of December 31, 2017.

Thanks to the efforts of 3 full-time employees, the bank has amassed loans and leases worth $2.7 million, including real estate loans of $966,000. The bank currently holds $18.2 million in deposits from U.S. customers.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a valuable measurement of an institution's financial resilience. From a safety and soundness perspective, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Bank of Hamilton racked up 16 out of a possible 30 points, beating the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Bank of Hamilton's Tier 1 capital ratio was 46.65 percent, higher than the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Bank of Hamilton held equity amounting to 12.47 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these types of assets could eventually require a bank to use capital to absorb losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a future failure.

Bank of Hamilton beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, none of Bank of Hamilton'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 handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Bank of Hamilton's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Bank of Hamilton scored 2 out of a possible 30, falling short of the national average of 15.12.

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. Bank of Hamilton's most recent annualized quarterly return on equity was 0.42 percent, below the national average of 8.10 percent.

The bank reported net income of $11,000 on total equity of $2.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.05 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.