Safe and Sound

Hebron Savings Bank

Hebron, MD
3
Star Rating
Hebron Savings Bank is an FDIC-insured bank started in 1910 and currently based in Hebron, MD. The bank holds equity of $51.2 million on $591.9 million in assets, according to December 31, 2017, regulatory filings.

With 126 full-time employees in 13 offices in MD, the bank has amassed loans and leases worth $505.7 million, including real estate loans of $446.9 million. U.S. bank customers currently have $495.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Hebron Savings Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is crucial. It acts as a bulwark against losses and as protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, the higher the capital, the better.

Hebron Savings Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Hebron Savings Bank's Tier 1 capital ratio was 9.76 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Hebron Savings Bank held equity amounting to 8.65 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 unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these types of assets could eventually be forced to use capital to cover losses, diminishing 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 depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Hebron Savings Bank scored 28 out of a possible 40 points, lower than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 2.66 percent of Hebron Savings Bank's loans were noncurrent, meaning 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 handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Hebron Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, Hebron Savings Bank scored 14 out of a possible 30, coming in below the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Hebron Savings Bank's most recent annualized quarterly return on equity was 6.69 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.4 million on total equity of $51.2 million. The bank reported an annualized return on average assets, or ROA, of 0.59 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.