Safe and Sound

United Minnesota Bank

New London, MN
4
Star Rating
United Minnesota Bank is a New London, MN-based, FDIC-insured bank that opened its doors in 1890. Regulatory filings show the bank having equity of $2.4 million on $30.1 million in assets, as of December 31, 2017.

With 8 full-time employees, the bank currently holds loans and leases worth $24.5 million, including real estate loans of $15.5 million. U.S. bank customers currently have $27.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, United Minnesota Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial strength. It works as a bulwark against losses and as protection for accountholders when a bank is experiencing economic trouble. From a safety and soundness perspective, the higher the capital, the better.

United Minnesota Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 6 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. United Minnesota Bank's Tier 1 capital ratio was 10.56 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, United Minnesota Bank held equity amounting to 7.80 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 loans, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets could eventually have to use capital to absorb losses, shrinking its cushion of equity. 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 lower earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, United Minnesota Bank scored 40 out of a possible 40 points, exceeding 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, 0.16 percent of United Minnesota 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 troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on United Minnesota Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. Conversely, losses take away from a bank's ability to do those things.

United Minnesota Bank scored 14 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. United Minnesota Bank's most recent annualized quarterly return on equity was 6.74 percent, below the national average of 8.10 percent.

The bank reported net income of $158,000 on total equity of $2.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.52 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.