Safe and Sound

Heritage Bank & Trust

Columbia, TN
4
Star Rating
Started in 2006, Heritage Bank & Trust is an FDIC-insured bank based in Columbia, TN. As of December 31, 2017, the bank had equity of $12.1 million on $135.5 million in assets.

With 36 full-time employees in 3 offices in TN, the bank has amassed loans and leases worth $104.5 million, including real estate loans of $92.7 million. U.S. bank customers currently have $117.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Heritage Bank & Trust exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial strength, capital is crucial. From a safety and soundness perspective, the more capital, the better.

Heritage Bank & Trust fell below the national average of 13.13 on our test to measure capital adequacy, scoring 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Heritage Bank & Trust's Tier 1 capital ratio was 10.91 percent, higher than the 6 percent level considered adequate by regulators, 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 difficulties.

Overall, Heritage Bank & Trust held equity amounting to 8.90 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these types of assets could eventually be required to use capital to cover losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and increasing the chances of a failure in the future.

On Bankrate's asset quality test, Heritage Bank & Trust 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 helpful indicator of asset quality.As of December 31, 2017, 0.46 percent of Heritage Bank & Trust'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 handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Heritage Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on 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 better prepared to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Heritage Bank & Trust received above-average marks on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for Heritage Bank & Trust was 8.98 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.0 million on total equity of $12.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.86 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.