Safe and Sound

Hometown Community Bank

Cyrus, MN
4
Star Rating
Founded in 1901, Hometown Community Bank is an FDIC-insured bank headquartered in Cyrus, MN. Regulatory filings show the bank having equity of $2.6 million on assets of $32.4 million, as of December 31, 2017.

Thanks to the efforts of 8 full-time employees in 2 offices in MN, the bank holds loans and leases worth $26.3 million, including $17.8 million worth of real estate loans. The bank currently holds $26.8 million in deposits from U.S. customers.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is important. It acts as a buffer against losses and affords protection for depositors when a bank is experiencing economic trouble. From a safety and soundness perspective, more capital is better.

Hometown Community Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 6 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Hometown Community Bank's Tier 1 capital ratio was 10.55 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Hometown Community Bank held equity amounting to 7.97 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 problem assets, such as unpaid loans.

A bank with large numbers of these kinds of assets could eventually be forced to use capital to absorb losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Hometown Community Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

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, 0.68 percent of Hometown 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 below the national average of 1.01 percent.

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

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

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

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Hometown Community Bank's most recent annualized quarterly return on equity was 7.68 percent, below the national average of 8.10 percent.

The bank recorded net income of $193,000 on total equity of $2.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.62 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.