Safe and Sound

Heritage Bank of the Ozarks

Lebanon, MO
4
Star Rating
Heritage Bank of the Ozarks is a Lebanon, MO-based, FDIC-insured bank started in 2003. As of December 31, 2017, the bank held equity of $11.0 million on assets of $131.5 million.

With 38 full-time employees in 2 offices in MO, the bank holds loans and leases worth $93.5 million, including real estate loans of $76.4 million. U.S. bank customers currently have $110.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Heritage Bank of the Ozarks exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is valuable. It works as a cushion against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

Heritage Bank of the Ozarks received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Heritage Bank of the Ozarks's Tier 1 capital ratio was 12.54 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Heritage Bank of the Ozarks held equity amounting to 8.38 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 unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these types of assets may eventually be forced to use capital to absorb losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.

Heritage Bank of the Ozarks scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

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, 0.69 percent of Heritage Bank of the Ozarks'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 to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic 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 the Ozarks's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

Heritage Bank of the Ozarks scored 16 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important measure of a bank's earnings. Heritage Bank of the Ozarks's most recent annualized quarterly return on equity was 7.62 percent, below the national average of 8.10 percent.

The bank reported net income of $821,000 on total equity of $11.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.64 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.