Safe and Sound

Heritage Bank

Jonesboro, GA
3
Star Rating
Started in 1955, Heritage Bank is an FDIC-insured bank headquartered in Jonesboro, GA. As of December 31, 2017, the bank had equity of $43.1 million on $475.5 million in assets.

U.S. bank customers have $409.5 million on deposit at 7 offices in GA run by 104 full-time employees. With that footprint, the bank currently holds loans and leases worth $357.4 million, including real estate loans of $296.4 million.

Overall, Bankrate believes that, as of December 31, 2017, Heritage Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial strength. It works as a cushion against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

Heritage Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, 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's Tier 1 capital ratio was 10.58 percent, higher than the 6 percent level considered adequate by regulators, but less than 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 held equity amounting to 9.07 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these kinds of assets may eventually have to use capital to absorb losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Heritage Bank scored 36 out of a possible 40 points, lower than the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.25 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. 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 has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand financial trouble. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's earnings test, Heritage Bank scored 8 out of a possible 30, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Heritage Bank's most recent annualized quarterly return on equity was 3.22 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.3 million on total equity of $43.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.29 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.