Safe and Sound

Heritage First Bank

Rome, GA
4
Star Rating
Started in 1904, Heritage First Bank is an FDIC-insured bank based in Rome, GA. As of December 31, 2017, the bank held equity of $13.5 million on $133.0 million in assets.

U.S. bank customers have $113.5 million on deposit at 3 offices in GA run by 47 full-time employees. With that footprint, the bank has amassed loans and leases worth $109.3 million, including real estate loans of $82.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Heritage First Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial resilience. It acts as a bulwark against losses and as protection for depositors during periods of economic instability 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 First Bank received a score of 10 out of a possible 30 points, falling short of the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Heritage First Bank's Tier 1 capital ratio was 12.66 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Heritage First Bank held equity amounting to 10.12 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

Having extensive holdings of these types of assets suggests a bank may eventually have to use capital to cover losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

Heritage First Bank scored 36 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.31 percent of Heritage First Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used 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 First Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses take away from a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. Heritage First Bank's most recent annualized quarterly return on equity was 8.38 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.1 million on total equity of $13.5 million. The bank reported an annualized return on average assets, or ROA, of 0.85 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.