Heritage Bank of Schaumburg

THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial fortitude. It acts as a bulwark against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

Heritage Bank of Schaumburg received a score of 6 out of a possible 30 points on our test to measure the adequacy of a bank's capital, 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. Heritage Bank of Schaumburg's Tier 1 capital ratio was 21.25 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, Heritage Bank of Schaumburg held equity amounting to 13.02 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually have to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

Heritage Bank of Schaumburg scored 36 out of a possible 40 points on Bankrate's asset quality test, falling short of the national average of 37.49.

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, 1.09 percent of Heritage Bank of Schaumburg's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with problem 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. Unfortunately, the FDIC did not provide information on Heritage Bank of Schaumburg's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance 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 more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, Heritage Bank of Schaumburg scored 12 out of a possible 30, failing to reach the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Heritage Bank of Schaumburg's most recent annualized quarterly return on equity was 5.76 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.1 million on total equity of $18.9 million. The bank reported an annualized return on average assets, or ROA, of 0.76 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.