Safe and Sound

Hiawatha Bank and Trust Company

Hiawatha, IA
5
Star Rating
Hiawatha Bank and Trust Company is an FDIC-insured bank started in 1997 and currently based in Hiawatha, IA. The bank holds equity of $5.9 million on $56.8 million in assets, according to December 31, 2017, regulatory filings.

With 11 full-time employees, the bank currently holds loans and leases worth $53.5 million, including real estate loans of $42.2 million. U.S. bank customers currently have $42.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Hiawatha Bank and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors during periods of economic instability for the bank. Therefore, a bank's level of capital is a valuable measurement of a bank's financial strength. From a safety and soundness perspective, the more capital, the better.

Hiawatha Bank and Trust Company scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Hiawatha Bank and Trust Company's Tier 1 capital ratio was 11.81 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, Hiawatha Bank and Trust Company held equity amounting to 10.30 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these types of assets suggests a bank may have to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and elevating the chances of a failure in the future.

Hiawatha Bank and Trust Company scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.09 percent of Hiawatha Bank and Trust Company'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." How large that reserve is can be a handy 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 Hiawatha Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Hiawatha Bank and Trust Company scored 20 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Hiawatha Bank and Trust Company's most recent annualized quarterly return on equity was 12.00 percent, above the national average of 8.10 percent.

The bank reported net income of $671,000 on total equity of $5.9 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.23 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.