Safe and Sound

The Union State Bank

Arkansas City, KS
4
Star Rating
The Union State Bank is an FDIC-insured bank founded in 1908 and currently based in Arkansas City, KS. As of December 31, 2017, the bank had equity of $37.3 million on assets of $308.5 million.

With 71 full-time employees in 9 offices in KS, the bank has amassed loans and leases worth $202.1 million, including real estate loans of $156.5 million. U.S. bank customers currently have $250.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Union State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is essential. It works as a cushion against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

The Union State Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Union State Bank's Tier 1 capital ratio was 12.00 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, The Union State Bank held equity amounting to 12.10 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets could eventually be forced to use capital to cover losses, cutting down on 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 interest for the bank, pushing down earnings and increasing the risk of a future failure.

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

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, 0.13 percent of The Union State 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." 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 problematic loans. The Union State Bank's loan loss allowance was 1,305.36 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. Losses, on the other hand, lessen a bank's ability to do those things.

The Union State Bank scored 16 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The Union State Bank's most recent annualized quarterly return on equity was 7.28 percent, below the national average of 8.10 percent.

The bank earned net income of $2.7 million on total equity of $37.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.88 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.