Safe and Sound

Southern Heritage Bank

Jonesville, LA
5
Star Rating
Founded in 1972, Southern Heritage Bank is an FDIC-insured bank based in Jonesville, LA. Regulatory filings show the bank having equity of $34.3 million on $299.9 million in assets, as of December 31, 2017.

With 103 full-time employees in 10 offices in LA, the bank currently holds loans and leases worth $209.7 million, including real estate loans of $164.5 million. U.S. bank customers currently have $264.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Southern Heritage 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 important criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for account holders during times of financial trouble for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is valuable. When it comes to safety and soundness, the higher the capital, the better.

Southern Heritage Bank exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Southern Heritage Bank's Tier 1 capital ratio was 18.45 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Southern Heritage Bank held equity amounting to 11.43 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having lots of these kinds of assets could eventually force a bank to use capital to cover losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

Southern Heritage Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.75 percent of Southern 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 deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used 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 Southern Heritage 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 can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Southern Heritage Bank received above-average marks on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) 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 Southern Heritage Bank was 12.70 percent, above the national average of 8.10 percent.

The bank reported net income of $4.4 million on total equity of $34.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.48 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.