Safe and Sound

Heartland Tri-State Bank

Elkhart, KS
4
Star Rating
Elkhart, KS-based Heartland Tri-State Bank is an FDIC-insured bank founded in 1985. The bank has equity of $9.6 million on assets of $85.3 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $75.1 million on deposit at 2 offices in KS run by 20 full-time employees. With that footprint, the bank has amassed loans and leases worth $53.3 million, including $21.3 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Heartland Tri-State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is important. It acts as a buffer against losses and provides protection for accountholders during periods of economic instability for the bank. When looking at safety and soundness, more capital is preferred.

Heartland Tri-State Bank racked up 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Heartland Tri-State Bank's Tier 1 capital ratio was 16.75 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 downturns.

Overall, Heartland Tri-State Bank held equity amounting to 11.20 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets may eventually be forced to use capital to cover losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Heartland Tri-State Bank fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.53 percent of Heartland Tri-State Bank'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 to handle problem 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 problem assets. Unfortunately, the FDIC did not provide information on Heartland Tri-State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, Heartland Tri-State Bank scored 18 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 (essentially profit) divided by the total amount of equity. Heartland Tri-State Bank's most recent annualized quarterly return on equity was 9.18 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $854,000 on total equity of $9.6 million. The bank experienced an annualized return on average assets, or ROA, of 1.06 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.