Safe and Sound

Home Loan Investment Bank, F.S.B.

Warwick, RI
5
Star Rating
Warwick, RI-based Home Loan Investment Bank, F.S.B. is an FDIC-insured bank founded in 1979. The bank holds equity of $30.4 million on assets of $264.5 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $231.8 million on deposit at 3 offices in RI run by 127 full-time employees. With that footprint, the bank holds loans and leases worth $229.1 million, including $170.6 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Home Loan Investment Bank, F.S.B. exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of a bank's financial fortitude. From a safety and soundness perspective, more capital is better.

Home Loan Investment Bank, F.S.B. did better than the national average of 13.13 points on our test to measure capital adequacy, racking up 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. Home Loan Investment Bank, F.S.B.'s Tier 1 capital ratio was 14.74 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, Home Loan Investment Bank, F.S.B. held equity amounting to 11.51 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having extensive holdings of these types of assets suggests a bank may have to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the chances of a future failure.

On Bankrate's test of asset quality, Home Loan Investment Bank, F.S.B. scored 36 out of a possible 40 points, lower than 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, 1.25 percent of Home Loan Investment Bank, F.S.B.'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 maintain a reserve to handle troubled 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 problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Home Loan Investment Bank, F.S.B.'s loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

Home Loan Investment Bank, F.S.B. outperformed the average on Bankrate's earnings test, achieving a score of 24 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. The most recent annualized quarterly return on equity for Home Loan Investment Bank, F.S.B. was 16.02 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $4.4 million on total equity of $30.4 million. The bank reported an annualized return on average assets, or ROA, of 1.61 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.