Safe and Sound

Heartland State Bank

Edgeley, ND
4
Star Rating
Heartland State Bank is an FDIC-insured bank started in 1921 and currently headquartered in Edgeley, ND. As of December 31, 2017, the bank held equity of $7.3 million on $59.6 million in assets.

With 12 full-time employees in 2 offices in ND, the bank holds loans and leases worth $40.5 million, including real estate loans of $14.7 million. U.S. bank customers currently have $50.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Heartland State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial stability, capital is essential. When looking at safety and soundness, the more capital, the better.

Heartland State Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Heartland State Bank's Tier 1 capital ratio was 14.10 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Heartland State Bank held equity amounting to 12.32 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Heartland State Bank scored 40 out of a possible 40 points, above 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, 0.77 percent 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 problem assets . 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 State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on 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, potentially making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Heartland State Bank scored 12 out of a possible 30, less than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Heartland State Bank's most recent annualized quarterly return on equity was 5.76 percent, below the national average of 8.10 percent.

The bank recorded net income of $427,000 on total equity of $7.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.69 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.