Safe and Sound

United Community Bank

Milford, IA
5
Star Rating
Founded in 1931, United Community Bank is an FDIC-insured bank headquartered in Milford, IA. As of December 31, 2017, the bank held equity of $22.0 million on $212.7 million in assets.

Thanks to the efforts of 36 full-time employees in 5 offices in IA, the bank has amassed loans and leases worth $179.3 million, including $108.5 million worth of real estate loans. The bank currently holds $187.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, United Community Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for account holders during times of economic instability for the bank. Therefore, a bank's level of capital is a valuable measurement of an institution's financial resilience. From a safety and soundness perspective, the more capital, the better.

United Community Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. United Community Bank's Tier 1 capital ratio was 10.13 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, United Community Bank held equity amounting to 10.33 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets means a bank could have to use capital to cover losses, diminishing its cushion 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, resulting in lower earnings and potentially more risk of a failure in the future.

United Community Bank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

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, none 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk 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 Community Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

United Community Bank outperformed the average on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. United Community Bank's most recent annualized quarterly return on equity was 13.55 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.9 million on total equity of $22.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.42 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.