Safe and Sound

Heartland Bank

Somers, IA
5
Star Rating
Somers, IA-based Heartland Bank is an FDIC-insured bank founded in 1901. Regulatory filings show the bank having equity of $18.5 million on $145.3 million in assets, as of December 31, 2017.

U.S. bank customers have $119.6 million on deposit at 4 offices in IA run by 23 full-time employees. With that footprint, the bank currently holds loans and leases worth $107.6 million, including $36.9 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Heartland Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to grade American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is key. It acts as a bulwark against losses and provides protection for depositors during periods of financial instability for the bank. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Heartland Bank achieved a score of 16 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Heartland Bank's Tier 1 capital ratio was 13.99 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Heartland Bank held equity amounting to 12.76 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these types of assets could eventually be forced to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, Heartland Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.10 percent of Heartland Bank's loans were noncurrent -- in other words, 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 troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Heartland Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic trouble. Conversely, losses take away from a bank's ability to do those things.

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

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Heartland Bank's most recent annualized quarterly return on equity was 13.63 percent, above the national average of 8.10 percent.

The bank reported net income of $2.5 million on total equity of $18.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.83 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.