Safe and Sound

Union State Bank of West Salem

West Salem, WI
2
Star Rating
Founded in 1903, Union State Bank of West Salem is an FDIC-insured bank headquartered in West Salem, WI. The bank holds equity of $9.4 million on assets of $85.9 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $70.9 million on deposit at 2 offices in WI run by 17 full-time employees. With that footprint, the bank currently holds loans and leases worth $63.9 million, $49.3 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Union State Bank of West Salem exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial resilience. It works as a bulwark against losses and as protection for accountholders during periods of economic instability for the bank. From a safety and soundness perspective, more capital is better.

Union State Bank of West Salem received a score of 12 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Union State Bank of West Salem's Tier 1 capital ratio was 15.70 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, Union State Bank of West Salem held equity amounting to 10.97 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 impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets could eventually require a bank to use capital to absorb losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, Union State Bank of West Salem scored 24 out of a possible 40 points, less than 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, 4.39 percent of Union State Bank of West Salem'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 how large that reserve is to the total amount of problematic 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 State Bank of West Salem's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Union State Bank of West Salem scored 8 out of a possible 30, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. Union State Bank of West Salem's most recent annualized quarterly return on equity was 3.80 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $354,000 on total equity of $9.4 million. The bank had an annualized return on average assets, or ROA, of 0.43 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.