Safe and Sound

Dakota Heritage Bank of North Dakota

Hunter, ND
5
Star Rating
Hunter, ND-based Dakota Heritage Bank of North Dakota is an FDIC-insured bank founded in 1945. Regulatory filings show the bank having equity of $21.7 million on $194.7 million in assets, as of December 31, 2017.

With 42 full-time employees in 9 offices in ND, the bank currently holds loans and leases worth $144.1 million, including real estate loans of $49.6 million. U.S. bank customers currently have $165.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Dakota Heritage Bank of North Dakota 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 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 provides protection for account holders when a bank is experiencing financial trouble. It follows then that when it comes to measuring an an institution's financial fortitude, capital is important. From a safety and soundness perspective, more capital is preferred.

Dakota Heritage Bank of North Dakota received a score of 12 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Dakota Heritage Bank of North Dakota's Tier 1 capital ratio was 12.30 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Dakota Heritage Bank of North Dakota held equity amounting to 11.15 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

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

Dakota Heritage Bank of North Dakota scored 40 out of a possible 40 points on Bankrate's test of asset quality, better 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, 0.05 percent of Dakota Heritage Bank of North Dakota'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 reserve's size to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Dakota Heritage Bank of North Dakota's loan loss allowance was 2,792.41 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

Dakota Heritage Bank of North Dakota scored 26 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

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. Dakota Heritage Bank of North Dakota's most recent annualized quarterly return on equity was 16.59 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.5 million on total equity of $21.7 million. The bank had an annualized return on average assets, or ROA, of 1.78 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.