Safe and Sound

American Heritage Bank

Clovis, NM
5
Star Rating
Clovis, NM-based American Heritage Bank is an FDIC-insured bank founded in 2000. Regulatory filings show the bank having equity of $10.2 million on assets of $87.9 million, as of December 31, 2017.

With 19 full-time employees in 2 offices in NM, the bank has amassed loans and leases worth $51.0 million, including real estate loans of $22.6 million. U.S. bank customers currently have $73.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, American Heritage Bank 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 key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors during times of financial trouble for the bank. Therefore, a bank's level of capital is a valuable measurement of an institution's financial fortitude. When it comes to safety and soundness, more capital is better.

On our test to measure capital adequacy, American Heritage Bank achieved a score of 14 out of a possible 30 points, better than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. American Heritage Bank's Tier 1 capital ratio was 15.56 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, American Heritage Bank held equity amounting to 11.64 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 effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets may eventually have to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and increasing the chances of a failure in the future.

American Heritage Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, less than 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, 1.96 percent of American Heritage Bank's loans were noncurrent, meaning 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 problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on American Heritage Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. Conversely, losses reduce a bank's ability to do those things.

American Heritage Bank exceeded the national average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

One widely used way to measure 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 American Heritage Bank was 11.36 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.1 million on total equity of $10.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.24 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.