Safe and Sound

The Hondo National Bank

Hondo, TX
5
Star Rating
Hondo, TX-based The Hondo National Bank is an FDIC-insured bank started in 1934. The bank holds equity of $24.1 million on $254.2 million in assets, according to December 31, 2017, regulatory filings.

With 52 full-time employees in 4 offices in TX, the bank holds loans and leases worth $151.9 million, including real estate loans of $92.6 million. U.S. bank customers currently have $229.6 million in deposits with the bank.

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

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for account holders during times of economic trouble for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is valuable. When it comes to safety and soundness, the higher the capital, the better.

The Hondo National Bank fell below the national average of 13.13 on our test to measure capital adequacy, scoring 10 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. The Hondo National Bank's Tier 1 capital ratio was 14.13 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, The Hondo National Bank held equity amounting to 9.48 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is 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 unpaid mortgages.

Having lots of these kinds of assets could eventually require a bank to use capital to cover losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and increasing the chances of a future failure.

The Hondo National Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, 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, none of The Hondo National 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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The Hondo National 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. Conversely, losses diminish a bank's ability to do those things.

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

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The Hondo National Bank's most recent annualized quarterly return on equity was 14.42 percent, above the national average of 8.10 percent.

The bank reported net income of $3.4 million on total equity of $24.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.35 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.