Safe and Sound

Hiawatha National Bank

Hager City, WI
3
Star Rating
Hiawatha National Bank is an FDIC-insured bank started in 1917 and currently headquartered in Hager City, WI. As of December 31, 2017, the bank held equity of $21.1 million on $196.7 million in assets.

With 47 full-time employees in 5 offices in WI, the bank holds loans and leases worth $145.7 million, including real estate loans of $115.6 million. U.S. bank customers currently have $150.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Hiawatha National Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial resilience. It acts as a buffer against losses and provides protection for accountholders during times of economic trouble for the bank. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Hiawatha National Bank received a score of 10 out of a possible 30 points, failing to reach the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Hiawatha National Bank's Tier 1 capital ratio was 14.16 percent, higher than 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 stand up to economic challenges.

Overall, Hiawatha National Bank held equity amounting to 10.71 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

Having lots of these types of assets suggests a bank may have to use capital to cover losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Hiawatha National Bank scored 28 out of a possible 40 points, less than the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 6.46 percent of Hiawatha 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 above 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 reserve's size to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Hiawatha National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

Hiawatha National Bank fell short of the national average on Bankrate's test of earnings, achieving a score of 10 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for Hiawatha National Bank was 4.31 percent, below the national average of 8.10 percent.

The bank earned net income of $876,000 on total equity of $21.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.45 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.