Safe and Sound

Heritage Bank USA, Inc.

Hopkinsville, KY
4
Star Rating
Heritage Bank USA, Inc. is an FDIC-insured bank founded in 1879 and currently based in Hopkinsville, KY. As of December 31, 2017, the bank held equity of $96.8 million on assets of $915.7 million.

Thanks to the efforts of 229 full-time employees in 18 offices in multiple states, the bank currently holds loans and leases worth $638.6 million, $546.5 million of which are for real estate. The bank currently holds $754.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Heritage Bank USA, Inc. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important 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 fortitude, capital is essential. It acts as a bulwark against losses and as protection for accountholders when a bank is experiencing financial instability. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Heritage Bank USA, Inc. received a score of 12 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Heritage Bank USA, Inc.'s Tier 1 capital ratio was 15.13 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Heritage Bank USA, Inc. held equity amounting to 10.57 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 capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets could eventually be forced to use capital to absorb losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the chances of a failure in the future.

Heritage Bank USA, Inc. 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 helpful indicator of asset quality.As of December 31, 2017, 0.21 percent of Heritage Bank USA, Inc.'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 deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Heritage Bank USA, Inc.'s loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand economic shocks. However, banks that are losing money have less ability to do those things.

Heritage Bank USA, Inc. received below-average marks on Bankrate's test of earnings, achieving a score of 10 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Heritage Bank USA, Inc. was 4.92 percent, below the national average of 8.10 percent.

The bank recorded net income of $4.7 million on total equity of $96.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.52 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.