Safe and Sound

United Business Bank

Walnut Creek, CA
4
Star Rating
Started in 2004, United Business Bank is an FDIC-insured bank based in Walnut Creek, CA. The bank holds equity of $129.0 million on assets of $1.25 billion, according to December 31, 2017, regulatory filings.

With 158 full-time employees in 19 offices in multiple states, the bank has amassed loans and leases worth $890.1 million, including real estate loans of $779.3 million. U.S. bank customers currently have $1.10 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, United Business 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 major criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial resilience. It works as a buffer against losses and affords protection for depositors during times of financial instability for the bank. When looking at safety and soundness, the more capital, the better.

United Business Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, 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 Business Bank's Tier 1 capital ratio was 12.42 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, United Business Bank held equity amounting to 10.36 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these types of assets could eventually be forced to use capital to cover losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and increasing the chances of a future failure.

United Business Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out 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, 0.02 percent of United Business 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 troubled assets . The size of that reserve 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. United Business Bank's loan loss allowance was 2,354.75 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic trouble. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's test of earnings, United Business Bank scored 10 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 the total amount of equity. United Business Bank's most recent annualized quarterly return on equity was 5.42 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $5.6 million on total equity of $129.0 million. The bank experienced an annualized return on average assets, or ROA, of 0.57 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.