Safe and Sound

Union State Bank of Hazen

Hazen, ND
5
Star Rating
Hazen, ND-based Union State Bank of Hazen is an FDIC-insured bank founded in 1908. The bank holds equity of $13.5 million on assets of $138.7 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $125.0 million on deposit at 4 offices in ND run by 33 full-time employees. With that footprint, the bank currently holds loans and leases worth $77.6 million, $42.4 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Union State Bank of Hazen exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial strength. It works as a bulwark against losses and affords protection for depositors during periods of economic instability for the bank. From a safety and soundness perspective, more capital is preferred.

Union State Bank of Hazen fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 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 Hazen's Tier 1 capital ratio was 13.91 percent, above the 6 percent level considered adequate by regulators, but lower than 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, Union State Bank of Hazen held equity amounting to 9.75 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these kinds of assets could eventually be required to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.37 percent of Union State Bank of Hazen's loans were noncurrent -- in other words, 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Union State Bank of Hazen's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand financial trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Union State Bank of Hazen did above-average on Bankrate's earnings test, achieving a score of 24 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Union State Bank of Hazen's most recent annualized quarterly return on equity was 15.68 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.1 million on total equity of $13.5 million. The bank experienced an annualized return on average assets, or ROA, of 1.53 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.