Safe and Sound

The Union Bank of Mena

Mena, AR
5
Star Rating
The Union Bank of Mena is an FDIC-insured bank started in 1934 and currently headquartered in Mena, AR. The bank has equity of $26.2 million on assets of $252.6 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $222.9 million on deposit at 3 offices in AR run by 59 full-time employees. With that footprint, the bank holds loans and leases worth $169.8 million, including real estate loans of $126.8 million.

Overall, Bankrate believes that, as of December 31, 2017, The Union Bank of Mena exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders during periods of economic instability for the bank. Therefore, when it comes to measuring an an institution's financial strength, capital is valuable. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, The Union Bank of Mena received a score of 12 out of a possible 30 points, below the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. The Union Bank of Mena's Tier 1 capital ratio was 17.28 percent, higher than the 6 percent level considered adequate by regulators, but lower than 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, The Union Bank of Mena held equity amounting to 10.38 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets could eventually require a bank to use capital to cover losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, The Union Bank of Mena scored 40 out of a possible 40 points, above the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.38 percent of The Union Bank of Mena'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 known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful 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 The Union Bank of Mena'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 buffer, or be used to address problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

The Union Bank of Mena outperformed the average on Bankrate's earnings test, achieving a score of 28 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for The Union Bank of Mena was 19.45 percent, above the national average of 8.10 percent.

The bank reported net income of $4.9 million on total equity of $26.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.98 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.