Safe and Sound

Hills Bank and Trust Company

Hills, IA
5
Star Rating
Started in 1904, Hills Bank and Trust Company is an FDIC-insured bank headquartered in Hills, IA. Regulatory filings show the bank having equity of $355.5 million on assets of $2.96 billion, as of December 31, 2017.

With 471 full-time employees in 20 offices in IA, the bank currently holds loans and leases worth $2.44 billion, including real estate loans of $2.07 billion. U.S. bank customers currently have $2.29 billion in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of an institution's financial fortitude. When it comes to safety and soundness, the more capital, the better.

Hills Bank and Trust Company beat out the national average of 13.13 points on our test to measure capital adequacy, scoring 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Hills Bank and Trust Company's Tier 1 capital ratio was 15.44 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Hills Bank and Trust Company held equity amounting to 12.00 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

A bank with extensive holdings of these kinds of assets could eventually have to use capital to cover losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.41 percent of Hills 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Hills Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's test of earnings, Hills Bank and Trust Company scored 18 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. Hills Bank and Trust Company's most recent annualized quarterly return on equity was 8.35 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $28.7 million on total equity of $355.5 million. The bank reported an annualized return on average assets, or ROA, of 1.03 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.