Safe and Sound

Hometown Bank of Corbin, Inc.

Corbin, KY
4
Star Rating
Hometown Bank of Corbin, Inc. is an FDIC-insured bank started in 2000 and currently based in Corbin, KY. Regulatory filings show the bank having equity of $13.9 million on $159.0 million in assets, as of December 31, 2017.

U.S. bank customers have $132.7 million on deposit at 5 offices in KY run by 52 full-time employees. With that footprint, the bank holds loans and leases worth $108.2 million, $94.8 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Hometown Bank of Corbin, Inc. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is an essential measurement of an institution's financial strength. When it comes to safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, Hometown Bank of Corbin, Inc. received a score of 8 out of a possible 30 points, 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. Hometown Bank of Corbin, Inc.'s Tier 1 capital ratio was 12.84 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Hometown Bank of Corbin, Inc. held equity amounting to 8.76 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 lots of these kinds of assets could eventually force a bank to use capital to absorb losses, reducing its equity cushion. 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, pushing down earnings and elevating the risk of a failure in the future.

On Bankrate's test of asset quality, Hometown Bank of Corbin, Inc. scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.72 percent of Hometown Bank of Corbin, Inc.'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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Hometown Bank of Corbin, Inc.'s loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand financial trouble. Banks that are losing money, however, have less ability to do those things.

Hometown Bank of Corbin, Inc. scored 16 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Hometown Bank of Corbin, Inc. was 7.32 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.0 million on total equity of $13.9 million. The bank had an annualized return on average assets, or ROA, of 0.63 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.