Safe and Sound

Union Bank

Jamestown, TN
3
Star Rating
Jamestown, TN-based Union Bank is an FDIC-insured bank started in 1904. As of December 31, 2017, the bank held equity of $23.0 million on $209.6 million in assets.

Thanks to the efforts of 50 full-time employees in 3 offices in TN, the bank currently holds loans and leases worth $114.6 million, $78.8 million of which are for real estate. The bank currently holds $185.3 million in deposits from U.S. customers.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors during periods of economic trouble for the bank. It follows then that a bank's level of capital is a key measurement of a bank's financial strength. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Union Bank received a score of 12 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Union Bank's Tier 1 capital ratio was 18.92 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, Union Bank held equity amounting to 11.00 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

A bank with lots of these types of assets could eventually be forced to use capital to absorb losses, cutting down on its cushion of equity. 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, diminishing earnings and increasing the risk of a future failure.

On Bankrate's asset quality test, Union Bank scored 32 out of a possible 40 points, coming in below the national average of 37.49 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, 2.02 percent of 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Union Bank'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 can be retained by the bank, expanding its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

Union Bank did below-average on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Union Bank's most recent annualized quarterly return on equity was 3.27 percent, below the national average of 8.10 percent.

The bank reported net income of $756,000 on total equity of $23.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.36 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.