Safe and Sound

United Prairie Bank

Mountain Lake, MN
4
Star Rating
United Prairie Bank is a Mountain Lake, MN-based, FDIC-insured bank started in 1919. The bank holds equity of $61.5 million on assets of $569.8 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 152 full-time employees in 13 offices in MN, the bank currently holds loans and leases worth $433.3 million, $241.0 million of which are for real estate. The bank currently holds $484.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, United Prairie Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors during times of economic trouble for the bank. It follows then that when it comes to measuring an a bank's financial strength, capital is important. When looking at safety and soundness, the higher the capital, the better.

United Prairie 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 10 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. United Prairie Bank's Tier 1 capital ratio was 10.99 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 difficulties.

Overall, United Prairie Bank held equity amounting to 10.80 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 impact of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets may eventually force a bank to use capital to absorb losses, reducing 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 money, pushing down earnings and increasing the risk of a future failure.

United Prairie Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.31 percent of United Prairie 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on United Prairie Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic trouble. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, United Prairie Bank scored 10 out of a possible 30, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. United Prairie Bank's most recent annualized quarterly return on equity was 4.93 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.0 million on total equity of $61.5 million. The bank had an annualized return on average assets, or ROA, of 0.54 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.