Safe and Sound

United Bank of Iowa

Ida Grove, IA
5
Star Rating
Ida Grove, IA-based United Bank of Iowa is an FDIC-insured bank founded in 1932. The bank has equity of $168.2 million on assets of $1.49 billion, according to December 31, 2017, regulatory filings.

With 259 full-time employees in 28 offices in IA, the bank has amassed loans and leases worth $1.12 billion, including real estate loans of $658.1 million. U.S. bank customers currently have $1.17 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, United Bank of Iowa 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 key criteria Bankrate used to score American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors during periods of financial instability for the bank. Therefore, a bank's level of capital is a crucial measurement of an institution's financial resilience. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, United Bank of Iowa received a score of 12 out of a possible 30 points, coming in below the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. United Bank of Iowa's Tier 1 capital ratio was 13.32 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, United Bank of Iowa held equity amounting to 11.29 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these kinds of assets could eventually be forced to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

United Bank of Iowa scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.50 percent of United Bank of Iowa'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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on United Bank of Iowa's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, United Bank of Iowa scored 24 out of a possible 30, better than the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. United Bank of Iowa's most recent annualized quarterly return on equity was 15.04 percent, above the national average of 8.10 percent.

The bank recorded net income of $24.5 million on total equity of $168.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.70 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.