Safe and Sound

The Highlands Bank

Jackson, LA
4
Star Rating
Founded in 1904, The Highlands Bank is an FDIC-insured bank based in Jackson, LA. The bank holds equity of $19.3 million on $150,135,000 in assets, according to June 30, 2017, regulatory filings.

Thanks to the efforts of 36 full-time employees in 6 offices in LA, the bank has amassed loans and leases worth $104.3 million, including real estate loans of $82.9 million. U.S. bank customers currently have $124.4 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, The Highlands Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank faired on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial fortitude. It works as a bulwark against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.
The Highlands Bank achieved a score of 16 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Highlands Bank's Tier 1 capital ratio was 18.92 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, The Highlands Bank held equity amounting to 12.88 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to cover losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and increasing the chances of a future failure.

The Highlands Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, coming in below the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of June 30, 2017, 1.74 percent of The Highlands Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Highlands Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's test of earnings, The Highlands Bank scored 20 out of a possible 30, above the national average of 16.52.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for The Highlands Bank was 11.56 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $1.1 million on total equity of $19.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.44 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.