Safe and Sound

Home Savings Bank

2
Star Rating
Madison, WI-based Home Savings Bank is an FDIC-insured bank started in 1895. The bank holds equity of $10.8 million on $152.3 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 36 full-time employees in 4 offices in WI, the bank has amassed loans and leases worth $127.9 million, $126.4 million of which are for real estate. U.S. bank customers currently have $119.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Home Savings Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for account holders during times of financial instability for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is important. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Home Savings Bank received a score of 6 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Home Savings Bank's Tier 1 capital ratio was 10.50 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 weather economic downturns.

Overall, Home Savings Bank held equity amounting to 7.06 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets means a bank could eventually have to use capital to absorb losses, decreasing its cushion of equity. 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, resulting in diminished earnings and potentially more risk of a future failure.

Home Savings Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, above 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, 0.18 percent of Home Savings 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 how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Home Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Home Savings Bank scored 0 out of a possible 30 on Bankrate's earnings test, below 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. Home Savings Bank's most recent annualized quarterly return on equity was -1.03 percent, below the national average of 8.10 percent.

The bank recorded net income of $-112,000 on total equity of $10.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of -0.08 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.