Safe and Sound

Home Exchange Bank

Jamesport, MO
5
Star Rating
Jamesport, MO-based Home Exchange Bank is an FDIC-insured bank started in 1925. The bank holds equity of $16.4 million on $158.3 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $109.3 million on deposit at 3 offices in MO run by 19 full-time employees. With that footprint, the bank has amassed loans and leases worth $62.5 million, including $44.5 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Home Exchange Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors during times of financial instability for the bank. Therefore, a bank's level of capital is a valuable measurement of an institution's financial fortitude. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, Home Exchange Bank received a score of 12 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Home Exchange Bank's Tier 1 capital ratio was 20.07 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Home Exchange Bank held equity amounting to 10.38 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due loans.

Having a large number of these types of assets may eventually require a bank to use capital to absorb losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, Home Exchange Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.21 percent of Home Exchange Bank's loans were noncurrent, meaning 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 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 at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Home Exchange Bank's loan loss allowance was 3,077.62 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

Home Exchange Bank scored 26 out of a possible 30 on Bankrate's test of earnings, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Home Exchange Bank was 17.91 percent, above the national average of 8.10 percent.

The bank earned net income of $2.9 million on total equity of $16.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.85 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.