WHAT IS
SAFE AND SOUND?
When it comes to measuring a credit union's financial fortitude, capital is key. It works as a bulwark against losses and affords protection for members when a credit union is struggling financially. When looking at safety and soundness, the higher the capital, the better.
On our test to measure capital adequacy, H E A received a score of 10 out of a possible 30 points, less than the national average of 15.65.
H E A appears to be weaker than its peers in this area, with a capitalization ratio of 10.00 percent in our test, worse than the average for all credit unions.
Bankrate uses this test to determine the impact of troubled assets, such as unpaid mortgages, on the credit union's loan loss reserves and overall capitalization.
Having large numbers of these types of assets suggests a credit union may eventually have to use capital to cover 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 no longer earning interest for the credit union, diminishing earnings and increasing the risk of a failure in the future.
H E A scored above the national average of 38.09 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .
H E A's ratio of troubled assets was 0.00 percent in our test, beneath the national average and potentially indicative of greater financial strength than other credit unions.
A credit union's profitability has an effect on its long-term survivability. A credit union can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, potentially making the credit union better prepared to withstand economic shocks. Losses, on the other hand, diminish a credit union's ability to do those things.
On Bankrate's earnings test, H E A scored 16 out of a possible 30, beating the national average of 10.11.
One indication that the credit union is beating its peers in this area was its earnings ratio of 0.00 percent in our test, higher than the average for all credit unions.
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.
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.