Safe and Sound

Holmes County Bank & Trust Company

Lexington, MS
4
Star Rating
Started in 1932, Holmes County Bank & Trust Company is an FDIC-insured bank headquartered in Lexington, MS. The bank has equity of $13.9 million on $116.9 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 22 full-time employees in 4 offices in MS, the bank has amassed loans and leases worth $48.6 million, $25.4 million of which are for real estate. U.S. bank customers currently have $100.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Holmes County Bank & Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of an institution's financial strength. When looking at safety and soundness, the higher the capital, the better.

Holmes County Bank & Trust Company exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 14 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. Holmes County Bank & Trust Company's Tier 1 capital ratio was 23.16 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, Holmes County Bank & Trust Company held equity amounting to 11.89 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled 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 types of assets may eventually be required 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 chances of a failure in the future.

Holmes County Bank & Trust Company scored 32 out of a possible 40 points on Bankrate's test of asset quality, failing to reach the national average of 37.49.

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, 5.71 percent of Holmes County Bank & Trust Company'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 maintain a reserve to handle troubled 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 Holmes County Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is 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, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Holmes County Bank & Trust Company fell behind the national average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Holmes County Bank & Trust Company's most recent annualized quarterly return on equity was 4.68 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $656,000 on total equity of $13.9 million. The bank experienced an annualized return on average assets, or ROA, of 0.57 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.