Safe and Sound

United Bankers' Bank

Bloomington, MN
4
Star Rating
Bloomington, MN-based United Bankers' Bank is an FDIC-insured bank started in 1975. As of December 31, 2017, the bank had equity of $95.7 million on $887.0 million in assets.

Thanks to the work of 127 full-time employees in 2 offices in multiple states, the bank currently holds loans and leases worth $609.5 million, including real estate loans of $362.6 million. The bank currently holds $680.9 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, United Bankers' Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is valuable. It acts as a cushion against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

United Bankers' Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. United Bankers' Bank's Tier 1 capital ratio was 12.63 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, United Bankers' Bank held equity amounting to 10.79 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 problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these types of assets means a bank may eventually have to use capital to absorb losses, shrinking its buffer of equity. 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.

On Bankrate's test of asset quality, United Bankers' Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.05 percent of United Bankers' Bank'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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. United Bankers' Bank's loan loss allowance was 2,272.55 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

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 buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

United Bankers' Bank fell behind the national average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for United Bankers' Bank was 3.56 percent, below the national average of 8.10 percent.

The bank reported net income of $3.4 million on total equity of $95.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.38 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.