Safe and Sound

Bank of Hydro

Hydro, OK
5
Star Rating
Hydro, OK-based Bank of Hydro is an FDIC-insured bank founded in 1903. The bank holds equity of $12.9 million on assets of $126.3 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 20 full-time employees in 3 offices in OK, the bank holds loans and leases worth $118.9 million, including $99.7 million worth of real estate loans. The bank currently holds $104.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Hydro 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 score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for depositors when a bank is experiencing financial instability. It follows then that a bank's level of capital is a useful measurement of a bank's financial resilience. From a safety and soundness perspective, the higher the capital, the better.

Bank of Hydro received a score of 12 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Bank of Hydro's Tier 1 capital ratio was 12.78 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Bank of Hydro held equity amounting to 10.25 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled 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 lots of these types of assets could eventually be forced to use capital to cover losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.08 percent of Bank of Hydro'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." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Bank of Hydro's loan loss allowance was 1,303.26 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand financial shocks. Conversely, losses take away from a bank's ability to do those things.

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

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. Bank of Hydro's most recent annualized quarterly return on equity was 26.26 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.3 million on total equity of $12.9 million. The bank had an annualized return on average assets, or ROA, of 2.69 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.