Safe and Sound

Heritage Community Bank

Greeneville, TN
5
Star Rating
Heritage Community Bank is an FDIC-insured bank founded in 2003 and currently headquartered in Greeneville, TN. As of December 31, 2017, the bank had equity of $9.2 million on $100.3 million in assets.

U.S. bank customers have $87.7 million on deposit at 3 offices in TN run by 30 full-time employees. With that footprint, the bank has amassed loans and leases worth $78.6 million, $67.3 million of which are for real estate.

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

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial fortitude. It acts as a bulwark against losses and provides protection for depositors during periods of economic trouble for the bank. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Heritage Community Bank received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Heritage Community Bank's Tier 1 capital ratio was 13.23 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, Heritage Community Bank held equity amounting to 9.19 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

Having extensive holdings of these types of assets could eventually force a bank to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the chances of a failure in the future.

Heritage Community Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.59 percent of Heritage Community 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 problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is 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 Community Bank'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 may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. However, banks that are losing money are less able to do those things.

Heritage Community Bank scored 20 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

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 Community Bank was 11.11 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $958,000 on total equity of $9.2 million. The bank reported an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, and equal to 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.