Safe and Sound

Homewood Federal Savings Bank

Baltimore, MD
5
Star Rating
Homewood Federal Savings Bank is an FDIC-insured bank founded in 1916 and currently based in Baltimore, MD. Regulatory filings show the bank having equity of $15.7 million on $53.2 million in assets, as of December 31, 2017.

Thanks to the work of 6 full-time employees, the bank holds loans and leases worth $43.3 million, $41.0 million of which are for real estate. The bank currently holds $37.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Homewood Federal Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors when a bank is experiencing economic trouble. Therefore, when it comes to measuring an an institution's financial strength, capital is valuable. When looking at safety and soundness, the higher the capital, the better.

Homewood Federal Savings Bank racked up 30 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Homewood Federal Savings Bank's Tier 1 capital ratio was 45.83 percent, higher than the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Homewood Federal Savings Bank held equity amounting to 29.47 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to absorb losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

Homewood Federal Savings Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding 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, 0.94 percent of Homewood Federal Savings Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Homewood Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Homewood Federal Savings Bank scored 6 out of a possible 30, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Homewood Federal Savings Bank was 2.08 percent, below the national average of 8.10 percent.

The bank recorded net income of $317,000 on total equity of $15.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.57 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.