Safe and Sound

Horicon Bank

Horicon, WI
5
Star Rating
Started in 1896, Horicon Bank is an FDIC-insured bank based in Horicon, WI. Regulatory filings show the bank having equity of $70.8 million on assets of $694.3 million, as of December 31, 2017.

With 162 full-time employees in 15 offices in WI, the bank holds loans and leases worth $598.9 million, including real estate loans of $465.3 million. U.S. bank customers currently have $617.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Horicon Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial strength. It works as a bulwark against losses and as protection for accountholders during times of economic instability for the bank. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Horicon Bank received a score of 10 out of a possible 30 points, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Horicon Bank's Tier 1 capital ratio was 10.91 percent, above 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 stand up to economic difficulties.

Overall, Horicon Bank held equity amounting to 10.20 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these types of assets could eventually be required to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

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

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, 0.70 percent of Horicon 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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Horicon Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's test of earnings, Horicon Bank scored 22 out of a possible 30, better than the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Horicon Bank was 13.76 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $9.5 million on total equity of $70.8 million. The bank experienced an annualized return on average assets, or ROA, of 1.42 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.