Safe and Sound

The Hamilton Bank

Hamilton, MO
5
Star Rating
The Hamilton Bank is a Hamilton, MO-based, FDIC-insured bank founded in 1938. As of December 31, 2017, the bank held equity of $7.4 million on $74.0 million in assets.

Thanks to the efforts of 17 full-time employees in 3 offices in MO, the bank holds loans and leases worth $47.7 million, $34.2 million of which are for real estate. The bank currently holds $65.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Hamilton Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is essential. It acts as a bulwark against losses and affords protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

The Hamilton Bank scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Hamilton Bank's Tier 1 capital ratio was 14.70 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, The Hamilton Bank held equity amounting to 9.96 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having a large number of these types of assets could eventually require a bank to use capital to cover losses, shrinking its cushion 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 depressed earnings and potentially more risk of a future failure.

The Hamilton Bank fell below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

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, 1.73 percent of The Hamilton 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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Hamilton Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

The Hamilton Bank scored 24 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for The Hamilton Bank was 15.41 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.1 million on total equity of $7.4 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.51 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.