Safe and Sound

Home State Bank

Jefferson, IA
5
Star Rating
Started in 1934, Home State Bank is an FDIC-insured bank based in Jefferson, IA. The bank has equity of $21.0 million on assets of $246.1 million, according to December 31, 2017, regulatory filings.

With 47 full-time employees, the bank currently holds loans and leases worth $200.8 million, including real estate loans of $108.1 million. U.S. bank customers currently have $212.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Home State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is useful. It works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

Home State Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Home State Bank's Tier 1 capital ratio was 10.03 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Home State Bank held equity amounting to 8.54 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 effect of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these kinds of assets may eventually require a bank to use capital to absorb 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, reducing earnings and elevating the risk of a future failure.

Home State Bank scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.02 percent of Home State Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Home State Bank's loan loss allowance was 5,859.52 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Home State Bank scored 26 out of a possible 30, better than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Home State Bank was 17.33 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.5 million on total equity of $21.0 million. The bank had an annualized return on average assets, or ROA, of 1.45 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.