Safe and Sound

Hometown Bank

Oxford, MA
4
Star Rating
Founded in 1889, Hometown Bank is an FDIC-insured bank headquartered in Oxford, MA. The bank holds equity of $91.2 million on $723.0 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 114 full-time employees in 13 offices in multiple states, the bank holds loans and leases worth $497.2 million, including $460.1 million worth of real estate loans. U.S. bank customers currently have $621.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Hometown Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders during times of financial trouble for the bank. It follows then that when it comes to measuring an a bank's financial stability, capital is key. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Hometown Bank received a score of 12 out of a possible 30 points, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Hometown Bank's Tier 1 capital ratio was 15.60 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Hometown Bank held equity amounting to 12.61 percent of its assets, which exceeded 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 problem assets, such as past-due mortgages.

Having lots of these kinds of assets suggests a bank may eventually have to use capital to cover losses, reducing its buffer 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 reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Hometown Bank scored 36 out of a possible 40 points, coming in below the national average of 37.49 points.

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, 1.51 percent of Hometown 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Hometown Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Hometown Bank scored 12 out of a possible 30, below the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Hometown Bank was 5.59 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $5.0 million on total equity of $91.2 million. The bank reported an annualized return on average assets, or ROA, of 0.68 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.