Safe and Sound

Belmont Federal Savings and Loan Association

Belmont, NC
5
Star Rating
Belmont Federal Savings and Loan Association is a Belmont, NC-based, FDIC-insured bank started in 1915. Regulatory filings show the bank having equity of $18.5 million on $94.2 million in assets, as of December 31, 2017.

Thanks to the work of 11 full-time employees, the bank holds loans and leases worth $65.1 million, $65.7 million of which are for real estate. The bank currently holds $75.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Belmont Federal Savings and Loan Association 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 U.S. 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 key. It works as a bulwark against losses and affords protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

Belmont Federal Savings and Loan Association did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 30 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Belmont Federal Savings and Loan Association's Tier 1 capital ratio was 40.77 percent, above the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Belmont Federal Savings and Loan Association held equity amounting to 19.62 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets suggests a bank may have to use capital to absorb losses, decreasing its buffer 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 reduced earnings and potentially more risk of a failure in the future.

Belmont Federal Savings and Loan Association beat out the national average of 37.49 on Bankrate's test of asset quality, 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, 0.41 percent of Belmont Federal Savings and Loan Association'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 deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Belmont Federal Savings and Loan Association's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

Belmont Federal Savings and Loan Association fell behind the national average on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Belmont Federal Savings and Loan Association's most recent annualized quarterly return on equity was 2.35 percent, below the national average of 8.10 percent.

The bank recorded net income of $430,000 on total equity of $18.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.45 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.