Safe and Sound

Hometown Bank

Fond Du Lac, WI
5
Star Rating
Hometown Bank is an FDIC-insured bank founded in 1907 and currently based in Fond Du Lac, WI. Regulatory filings show the bank having equity of $39.8 million on assets of $298.9 million, as of December 31, 2017.

With 54 full-time employees in 7 offices in WI, the bank currently holds loans and leases worth $244.3 million, including real estate loans of $174.9 million. U.S. bank customers currently have $249.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Hometown Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is important. It acts as a bulwark against losses and as protection for accountholders during periods of financial trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

Hometown Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 16 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Hometown Bank's Tier 1 capital ratio was 15.69 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Hometown Bank held equity amounting to 13.33 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these types of assets means a bank could eventually have to use capital to absorb losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.61 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 below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. 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 has an effect on its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand financial trouble. However, banks that are losing money are less able to do those things.

Hometown Bank scored 20 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Hometown Bank was 10.36 percent, above the national average of 8.10 percent.

The bank reported net income of $4.0 million on total equity of $39.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.41 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.