Safe and Sound

Heartland State Bank

Redfield, SD
5
Star Rating
Heartland State Bank is a Redfield, SD-based, FDIC-insured bank that opened its doors in 1909. As of December 31, 2017, the bank had equity of $10.1 million on $81.9 million in assets.

Thanks to the work of 21 full-time employees in 4 offices in SD, the bank holds loans and leases worth $64.9 million, $9.4 million of which are for real estate. The bank currently holds $69.4 million in deposits from U.S. customers.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial fortitude. It acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

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

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Heartland State Bank's Tier 1 capital ratio was 13.38 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, Heartland State Bank held equity amounting to 12.37 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

A bank with large numbers of these kinds of assets could eventually be forced to use capital to cover losses, cutting down on its cushion of equity. 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, resulting in lower earnings and potentially more risk of a failure in the future.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Heartland State Bank's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled 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 Heartland State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand economic trouble. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's test of earnings, Heartland State Bank scored 24 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. Heartland State Bank's most recent annualized quarterly return on equity was 15.18 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.5 million on total equity of $10.1 million. The bank experienced an annualized return on average assets, or ROA, of 1.93 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.