Safe and Sound

Hawthorn Bank

Jefferson City, MO
4
Star Rating
Founded in 1911, Hawthorn Bank is an FDIC-insured bank headquartered in Jefferson City, MO. The bank has equity of $141.0 million on $1.42 billion in assets, according to December 31, 2017, regulatory filings.

With 332 full-time employees in 22 offices in MO, the bank holds loans and leases worth $1.06 billion, including real estate loans of $844.0 million. U.S. bank customers currently have $1.13 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Hawthorn Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is key. It acts as a cushion against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

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

A bank's Tier 1 capital ratio is an important measure of this buffer. Hawthorn Bank's Tier 1 capital ratio was 11.92 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Hawthorn Bank held equity amounting to 9.91 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

Hawthorn Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, failing to reach the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.56 percent of Hawthorn 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Hawthorn Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Hawthorn Bank received below-average marks on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Hawthorn Bank's most recent annualized quarterly return on equity was 5.19 percent, below the national average of 8.10 percent.

The bank earned net income of $7.3 million on total equity of $141.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.54 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.