Safe and Sound

The Union Bank

Beulah, ND
3
Star Rating
The Union Bank is an FDIC-insured bank started in 1899 and currently based in Beulah, ND. Regulatory filings show the bank having equity of $15.6 million on assets of $153.5 million, as of December 31, 2017.

With 24 full-time employees in 5 offices in ND, the bank currently holds loans and leases worth $107.9 million, including real estate loans of $59.8 million. U.S. bank customers currently have $137.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Union Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is important. It works as a bulwark against losses and affords protection for accountholders during times of financial instability for the bank. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The Union Bank received a score of 10 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. The Union Bank's Tier 1 capital ratio was 11.89 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, The Union Bank held equity amounting to 10.15 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets could eventually have to use capital to absorb losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

The Union Bank finished below the national average of 37.49 on Bankrate's test of asset quality, racking up 28 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 3.48 percent of The Union 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 1.01 percent.

Banks keep a reserve to deal with problem 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 problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Union Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, potentially making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, The Union Bank scored 14 out of a possible 30, below 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. The most recent annualized quarterly return on equity for The Union Bank was 6.01 percent, below the national average of 8.10 percent.

The bank earned net income of $937,000 on total equity of $15.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.62 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.