Safe and Sound

The Hill-Dodge Banking Company

Warsaw, IL
3
Star Rating
The Hill-Dodge Banking Company is an FDIC-insured bank started in 1864 and currently headquartered in Warsaw, IL. Regulatory filings show the bank having equity of $5.6 million on $43.1 million in assets, as of December 31, 2017.

With 6 full-time employees, the bank currently holds loans and leases worth $22.1 million, including real estate loans of $8.1 million. U.S. bank customers currently have $37.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Hill-Dodge Banking Company exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for account holders when a bank is experiencing financial instability. Therefore, a bank's level of capital is an essential measurement of an institution's financial fortitude. When looking at safety and soundness, the more capital, the better.

The Hill-Dodge Banking Company scored above the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 18 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Hill-Dodge Banking Company's Tier 1 capital ratio was 21.89 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, The Hill-Dodge Banking Company held equity amounting to 13.02 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually be forced to use capital to absorb losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

The Hill-Dodge Banking Company did better than 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 handy indicator of asset quality.As of December 31, 2017, 0.98 percent of The Hill-Dodge Banking 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 troubled assets . Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Hill-Dodge Banking Company'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, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money have less ability to do those things.

The Hill-Dodge Banking Company scored 0 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The Hill-Dodge Banking Company's most recent annualized quarterly return on equity was -10.58 percent, below the national average of 8.10 percent.

The bank reported net income of $-652,000 on total equity of $5.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of -1.57 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.