Safe and Sound

United American Bank

San Mateo, CA
5
Star Rating
San Mateo, CA-based United American Bank is an FDIC-insured bank founded in 2003. The bank has equity of $32.1 million on $330.3 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $296.1 million on deposit at 3 offices in CA run by 41 full-time employees. With that footprint, the bank holds loans and leases worth $225.9 million, including real estate loans of $204.9 million.

Overall, Bankrate believes that, as of December 31, 2017, United American Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors during times of economic trouble for the bank. It follows then that a bank's level of capital is an important measurement of a bank's financial resilience. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, United American Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. United American Bank's Tier 1 capital ratio was 8.43 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, United American Bank held equity amounting to 9.73 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these types of assets could eventually force a bank to use capital to cover losses, shrinking its equity cushion. 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 elevating the chances of a future failure.

United American Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding 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, none of United American Bank'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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is 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 United American Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Conversely, losses take away from a bank's ability to do those things.

United American Bank beat the national average on Bankrate's earnings test, achieving a score of 24 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for United American Bank was 15.93 percent, above the national average of 8.10 percent.

The bank recorded net income of $4.7 million on total equity of $32.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.48 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.