Safe and Sound

Homeland Community Bank

Mcminnville, TN
2
Star Rating
Homeland Community Bank is an FDIC-insured bank founded in 2003 and currently headquartered in Mcminnville, TN. Regulatory filings show the bank having equity of $12.0 million on $139.3 million in assets, as of December 31, 2017.

U.S. bank customers have $126.0 million on deposit at 3 offices in TN run by 32 full-time employees. With that footprint, the bank holds loans and leases worth $86.7 million, $74.1 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Homeland Community Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is valuable. It works as a cushion against losses and provides protection for depositors when a bank is experiencing economic trouble. When looking at safety and soundness, more capital is preferred.

Homeland Community Bank scored below the national average of 13.13 on our test to measure capital adequacy, racking up 8 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Homeland Community Bank's Tier 1 capital ratio was 13.66 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, Homeland Community Bank held equity amounting to 8.62 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

Having extensive holdings of these kinds of assets may eventually force a bank to use capital to cover losses, cutting down on 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, resulting in diminished earnings and potentially more risk of a failure in the future.

Homeland Community Bank scored 28 out of a possible 40 points on Bankrate's test of asset quality, below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 2.36 percent of Homeland Community Bank'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Homeland Community Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. Banks that are losing money, however, are less able to do those things.

Homeland Community Bank scored 4 out of a possible 30 on Bankrate's earnings test, less than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Homeland Community Bank's most recent annualized quarterly return on equity was 1.58 percent, below the national average of 8.10 percent.

The bank recorded net income of $197,000 on total equity of $12.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.14 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.