Safe and Sound

Union State Bank of Fargo

Fargo, ND
5
Star Rating
Started in 1972, Union State Bank of Fargo is an FDIC-insured bank headquartered in Fargo, ND. The bank holds equity of $9.3 million on $99.2 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 14 full-time employees in 2 offices in ND, the bank holds loans and leases worth $76.8 million, $63.8 million of which are for real estate. U.S. bank customers currently have $81.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Union State Bank of Fargo exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is essential. It works as a buffer against losses and affords protection for depositors when a bank is experiencing economic instability. When it comes to safety and soundness, more capital is preferred.

Union State Bank of Fargo finished below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 10 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Union State Bank of Fargo's Tier 1 capital ratio was 12.57 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Union State Bank of Fargo held equity amounting to 9.34 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 problem assets, such as unpaid loans.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to absorb losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

Union State Bank of Fargo scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

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, 0.35 percent of Union State Bank of Fargo'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 to deal with problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Union State Bank of Fargo's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

Union State Bank of Fargo scored 22 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. Union State Bank of Fargo's most recent annualized quarterly return on equity was 12.34 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.1 million on total equity of $9.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.15 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.