Safe and Sound

United Community Bank

Chatham, IL
4
Star Rating
United Community Bank is a Chatham, IL-based, FDIC-insured bank dating back to 1965. As of December 31, 2017, the bank had equity of $168.4 million on $1.80 billion in assets.

U.S. bank customers have $1.49 billion on deposit at 36 offices in IL run by 463 full-time employees. With that footprint, the bank has amassed loans and leases worth $1.08 billion, including real estate loans of $783.4 million.

Overall, Bankrate believes that, as of December 31, 2017, United Community Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is useful. It works as a buffer against losses and provides protection for depositors when a bank is experiencing economic trouble. From a safety and soundness perspective, the higher the capital, the better.

United Community Bank fell below the national average of 13.13 on our test to measure capital adequacy, scoring 6 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. United Community Bank's Tier 1 capital ratio was 11.74 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, United Community Bank held equity amounting to 9.35 percent of its assets, which was lower than 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 past-due loans.

Having extensive holdings of these types of assets means a bank may eventually have to use capital to absorb losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, United Community Bank scored 36 out of a possible 40 points, below the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.65 percent of United Community 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 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 widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on United Community Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

United Community Bank scored 22 out of a possible 30 on Bankrate's test of earnings, above the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important measure of a bank's earnings. United Community Bank's most recent annualized quarterly return on equity was 13.29 percent, above the national average of 8.10 percent.

The bank earned net income of $22.5 million on total equity of $168.4 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.29 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.