Safe and Sound

Heritage Bank of St Tammany

Covington, LA
4
Star Rating
Heritage Bank of St Tammany is an FDIC-insured bank founded in 1924 and currently based in Covington, LA. As of December 31, 2017, the bank had equity of $17.7 million on $110.0 million in assets.

U.S. bank customers have $77.3 million on deposit at 2 offices in LA run by 22 full-time employees. With that footprint, the bank has amassed loans and leases worth $88.0 million, including real estate loans of $86.9 million.

Overall, Bankrate believes that, as of December 31, 2017, Heritage Bank of St Tammany exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is experiencing financial instability. Therefore, when it comes to measuring an a bank's financial resilience, capital is crucial. From a safety and soundness perspective, the higher the capital, the better.

Heritage Bank of St Tammany scored 22 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.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Heritage Bank of St Tammany's Tier 1 capital ratio was 27.42 percent, above the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Heritage Bank of St Tammany held equity amounting to 16.08 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate 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 means a bank may have to use capital to cover losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the risk of a future failure.

Heritage Bank of St Tammany beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.44 percent of Heritage Bank of St Tammany'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 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 troubled assets. Unfortunately, the FDIC did not provide information on Heritage Bank of St Tammany's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on 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 better able to withstand financial shocks. However, banks that are losing money are less able to do those things.

Heritage Bank of St Tammany scored 6 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Heritage Bank of St Tammany's most recent annualized quarterly return on equity was 4.13 percent, below the national average of 8.10 percent.

The bank recorded net income of $528,000 on total equity of $17.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.49 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.