Safe and Sound

Hodge Bank & Trust Company

Hodge, LA
5
Star Rating
Hodge Bank & Trust Company is an FDIC-insured bank founded in 1965 and currently based in Hodge, LA. The bank holds equity of $11.9 million on $68.3 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 15 full-time employees, the bank holds loans and leases worth $49.5 million, including real estate loans of $32.1 million. The bank currently holds $55.6 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Hodge Bank & Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of an institution's financial resilience. From a safety and soundness perspective, the more capital, the better.

Hodge Bank & Trust Company beat out the national average of 13.13 points on our test to measure capital adequacy, racking up 26 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Hodge Bank & Trust Company's Tier 1 capital ratio was 27.53 percent, above the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Hodge Bank & Trust Company held equity amounting to 17.38 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to cover losses, reducing its buffer 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 future failure.

Hodge Bank & Trust Company scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.77 percent of Hodge Bank & 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 problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Hodge Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses take away from a bank's ability to do those things.

Hodge Bank & Trust Company exceeded the national average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. Hodge Bank & Trust Company's most recent annualized quarterly return on equity was 13.07 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.5 million on total equity of $11.9 million. The bank had an annualized return on average assets, or ROA, of 2.23 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.