Safe and Sound

Home Federal Savings and Loan Association

Bamberg, SC
4
Star Rating
Bamberg, SC-based Home Federal Savings and Loan Association is an FDIC-insured bank started in 1920. Regulatory filings show the bank having equity of $5.1 million on assets of $40.4 million, as of December 31, 2017.

Thanks to the work of 6 full-time employees, the bank holds loans and leases worth $33.9 million, $32.6 million of which are for real estate. U.S. bank customers currently have $34.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Home Federal Savings and Loan Association exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors during times of economic trouble for the bank. It follows then that when it comes to measuring an an institution's financial fortitude, capital is important. When looking at safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, Home Federal Savings and Loan Association scored 16 out of a possible 30 points, better than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Home Federal Savings and Loan Association's Tier 1 capital ratio was 22.61 percent, above 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 weather financial headwinds.

Overall, Home Federal Savings and Loan Association held equity amounting to 12.50 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these types of assets could eventually be required to use capital to cover losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Home Federal Savings and Loan Association scored 40 out of a possible 40 points, beating the national average of 37.49 points.

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, 0.70 percent of Home Federal Savings and Loan Association's loans were noncurrent -- in other words, 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 handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Home Federal Savings and Loan Association's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

Home Federal Savings and Loan Association underperformed the average on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Home Federal Savings and Loan Association's most recent annualized quarterly return on equity was 3.99 percent, below the national average of 8.10 percent.

The bank recorded net income of $197,000 on total equity of $5.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.48 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.