Safe and Sound

Foundation Bank

Cincinnati, OH
5
Star Rating
Cincinnati, OH-based Foundation Bank is an FDIC-insured bank founded in 1888. As of December 31, 2017, the bank held equity of $43.3 million on assets of $215.2 million.

With 32 full-time employees in 5 offices in OH, the bank currently holds loans and leases worth $179.1 million, including real estate loans of $176.6 million. U.S. bank customers currently have $148.4 million in deposits with the bank.

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

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial fortitude. It acts as a bulwark against losses and affords protection for accountholders during periods of financial trouble for the bank. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Foundation Bank scored 28 out of a possible 30 points, beating the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Foundation Bank's Tier 1 capital ratio was 23.09 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, Foundation Bank held equity amounting to 20.10 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

Having lots of these kinds of assets may eventually require a bank to use capital to cover losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, Foundation Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 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, 0.24 percent of Foundation Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Foundation 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, expanding its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand financial shocks. However, banks that are losing money are less able to do those things.

Foundation Bank received below-average marks on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Foundation Bank was 6.75 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.8 million on total equity of $43.3 million. The bank reported an annualized return on average assets, or ROA, of 1.31 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.