Safe and Sound

Heritage State Bank

Lawrenceville, IL
5
Star Rating
Heritage State Bank is an FDIC-insured bank founded in 1899 and currently based in Lawrenceville, IL. Regulatory filings show the bank having equity of $9.3 million on $97.1 million in assets, as of December 31, 2017.

U.S. bank customers have $87.6 million on deposit at 3 offices in multiple states run by 10 full-time employees. With that footprint, the bank has amassed loans and leases worth $87.5 million, including $86.2 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Heritage State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is valuable. It acts as a bulwark against losses and provides protection for accountholders during times of economic instability for the bank. When looking at safety and soundness, the higher the capital, the better.

Heritage State Bank finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. Heritage State Bank's Tier 1 capital ratio was 9.91 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, Heritage State Bank held equity amounting to 9.58 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due loans.

Having a large number of these kinds of assets may eventually force a bank to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and elevating the risk of a failure in the future.

Heritage State Bank scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

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, none of Heritage State Bank'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Heritage State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, Heritage State Bank scored 28 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Heritage State Bank was 19.01 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.8 million on total equity of $9.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.84 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.