Safe and Sound

Freedom Bank

Huntingburg, IN
5
Star Rating
Huntingburg, IN-based Freedom Bank is an FDIC-insured bank founded in 1999. The bank has equity of $41.8 million on assets of $400.7 million, according to December 31, 2017, regulatory filings.

With 55 full-time employees in 4 offices in IN, the bank holds loans and leases worth $367.2 million, including real estate loans of $298.2 million. U.S. bank customers currently have $349.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Freedom Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is useful. It acts as a buffer against losses and provides protection for depositors when a bank is experiencing financial instability. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Freedom Bank received a score of 12 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Freedom Bank's Tier 1 capital ratio was 10.81 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Freedom Bank held equity amounting to 10.43 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to absorb losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.37 percent of Freedom 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 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Freedom Bank'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. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's test of earnings, Freedom Bank scored 30 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. Freedom Bank's most recent annualized quarterly return on equity was 21.91 percent, above the national average of 8.10 percent.

The bank recorded net income of $8.9 million on total equity of $41.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 2.29 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.