Safe and Sound

Hamlin Bank and Trust Company

Smethport, PA
5
Star Rating
Founded in 1863, Hamlin Bank and Trust Company is an FDIC-insured bank based in Smethport, PA. The bank has equity of $87.7 million on assets of $425.4 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $325.7 million on deposit at 8 offices in multiple states run by 87 full-time employees. With that footprint, the bank has amassed loans and leases worth $228.1 million, including real estate loans of $202.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Hamlin Bank and Trust Company 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 U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial resilience, capital is crucial. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Hamlin Bank and Trust Company racked up 30 out of a possible 30 points, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Hamlin Bank and Trust Company's Tier 1 capital ratio was 22.83 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Hamlin Bank and Trust Company held equity amounting to 20.62 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these types of assets means a bank could eventually have to use capital to cover losses, reducing its cushion of equity. 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, reducing earnings and elevating the risk of a failure in the future.

Hamlin Bank and Trust Company exceeded 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 useful indicator of asset quality.As of December 31, 2017, 1.96 percent of Hamlin Bank and Trust Company's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Hamlin Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to deal with problematic loans, likely making the bank better able to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

Hamlin Bank and Trust Company did above-average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Hamlin Bank and Trust Company's most recent annualized quarterly return on equity was 10.45 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $8.8 million on total equity of $87.7 million. The bank had an annualized return on average assets, or ROA, of 1.99 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.