Safe and Sound

United Bank

Springdale, AR
5
Star Rating
United Bank is a Springdale, AR-based, FDIC-insured bank started in 1978. The bank has equity of $23.0 million on assets of $185.2 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 50 full-time employees in 4 offices in AR, the bank holds loans and leases worth $149.9 million, including $128.4 million worth of real estate loans. The bank currently holds $141.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, United Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders during periods of financial trouble for the bank. It follows then that a bank's level of capital is a valuable measurement of a bank's financial strength. From a safety and soundness perspective, the more capital, the better.

United Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. United Bank's Tier 1 capital ratio was 15.47 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, United Bank held equity amounting to 12.42 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these kinds of assets may eventually have to use capital to absorb losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

United Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating 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, 0.64 percent of United 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on United Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially 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 earnings test, United Bank scored 18 out of a possible 30, above the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for United Bank was 8.78 percent, above the national average of 8.10 percent.

The bank reported net income of $2.0 million on total equity of $23.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.11 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.