Safe and Sound

Horizon Financial Bank

Munich, ND
5
Star Rating
Horizon Financial Bank is an FDIC-insured bank founded in 1905 and currently headquartered in Munich, ND. Regulatory filings show the bank having equity of $17.1 million on assets of $138.3 million, as of December 31, 2017.

U.S. bank customers have $121.1 million on deposit at 4 offices in ND run by 34 full-time employees. With that footprint, the bank currently holds loans and leases worth $106.2 million, $36.4 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Horizon Financial Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders when a bank is experiencing financial instability. Therefore, a bank's level of capital is an essential measurement of an institution's financial fortitude. When it comes to safety and soundness, the more capital, the better.

Horizon Financial Bank exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 16 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Horizon Financial Bank's Tier 1 capital ratio was 17.18 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Horizon Financial Bank held equity amounting to 12.35 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

Having large numbers of these types of assets may eventually require a bank to use capital to absorb losses, cutting down on its buffer 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, resulting in lower earnings and potentially more risk of a failure in the future.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.01 percent of Horizon Financial 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 to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Horizon Financial Bank's loan loss allowance was 23,600.00 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Horizon Financial Bank scored 14 out of a possible 30 on Bankrate's earnings test, falling short of the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Horizon Financial Bank was 7.02 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.2 million on total equity of $17.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.86 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.