Safe and Sound

Heritage Bank

Pearland, TX
5
Star Rating
Founded in 1985, Heritage Bank is an FDIC-insured bank headquartered in Pearland, TX. Regulatory filings show the bank having equity of $30.8 million on assets of $253.1 million, as of December 31, 2017.

With 62 full-time employees in 5 offices in TX, the bank currently holds loans and leases worth $216.3 million, including real estate loans of $199.3 million. U.S. bank customers currently have $218.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Heritage Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders when a bank is experiencing economic trouble. Therefore, a bank's level of capital is a useful measurement of an institution's financial fortitude. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Heritage Bank received a score of 12 out of a possible 30 points, 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's Tier 1 capital ratio was 12.52 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Heritage Bank held equity amounting to 12.17 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

Having lots of these types of assets could eventually require a bank to use capital to absorb losses, decreasing 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, resulting in reduced earnings and potentially more risk of a future failure.

Heritage Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating 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, 0.14 percent of Heritage Bank'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 troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Heritage Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Heritage Bank scored 18 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Heritage Bank's most recent annualized quarterly return on equity was 9.85 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.9 million on total equity of $30.8 million. The bank had an annualized return on average assets, or ROA, of 1.13 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.