Safe and Sound

Union State Bank

Olsburg, KS
4
Star Rating
Union State Bank is an Olsburg, KS-based, FDIC-insured bank started in 1910. As of December 31, 2017, the bank held equity of $4.8 million on assets of $34.5 million.

With 8 full-time employees in 2 offices in KS, the bank has amassed loans and leases worth $14.9 million, including real estate loans of $3.8 million. U.S. bank customers currently have $29.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Union State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors when a bank is experiencing financial instability. It follows then that a bank's level of capital is a crucial measurement of a bank's financial strength. When looking at safety and soundness, more capital is preferred.

Union State Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 18 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Union State Bank's Tier 1 capital ratio was 28.89 percent, exceeding the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, Union State Bank held equity amounting to 13.78 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having lots 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 interest for the bank, diminishing earnings and elevating the risk of a future failure.

Union State Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, coming in below the national average of 37.49.

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

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, Union State Bank scored 12 out of a possible 30, below the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Union State Bank's most recent annualized quarterly return on equity was 5.21 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $248,000 on total equity of $4.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.80 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.