Safe and Sound

Ultima Bank Minnesota

Winger, MN
5
Star Rating
Ultima Bank Minnesota is an FDIC-insured bank started in 1904 and currently based in Winger, MN. As of December 31, 2017, the bank had equity of $16.6 million on $163.0 million in assets.

With 40 full-time employees in 4 offices in MN, the bank has amassed loans and leases worth $154.8 million, including real estate loans of $83.5 million. U.S. bank customers currently have $135.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Ultima Bank Minnesota exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial stability, capital is crucial. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, Ultima Bank Minnesota received a score of 12 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Ultima Bank Minnesota's Tier 1 capital ratio was 10.58 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Ultima Bank Minnesota held equity amounting to 10.21 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 troubled assets, such as past-due loans.

Having extensive holdings of these kinds of assets means a bank may have to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

Ultima Bank Minnesota scored 36 out of a possible 40 points on Bankrate's test of asset quality, failing to reach the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.03 percent of Ultima Bank Minnesota's loans were noncurrent, meaning 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Ultima Bank Minnesota's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

Ultima Bank Minnesota did above-average on Bankrate's test of earnings, achieving a score of 30 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Ultima Bank Minnesota was 22.90 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.8 million on total equity of $16.6 million. The bank experienced an annualized return on average assets, or ROA, of 2.28 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.