Safe and Sound

United Southern Bank

Umatilla, FL
4
Star Rating
Umatilla, FL-based United Southern Bank is an FDIC-insured bank founded in 1937. The bank holds equity of $44.2 million on assets of $506.6 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $457.0 million on deposit at 13 offices in FL run by 152 full-time employees. With that footprint, the bank currently holds loans and leases worth $282.6 million, including real estate loans of $272.5 million.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is crucial. It works as a buffer against losses and as protection for accountholders when a bank is experiencing economic trouble. When looking at safety and soundness, the higher the capital, the better.

United Southern Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. United Southern Bank's Tier 1 capital ratio was 13.93 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, United Southern Bank held equity amounting to 8.73 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 impact of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these types of assets may eventually be required to use capital to absorb losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, reducing earnings and increasing the risk of a future failure.

United Southern Bank scored 32 out of a possible 40 points on Bankrate's asset quality test, less than the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.36 percent of United Southern Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on United Southern Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, potentially making the bank better prepared to withstand financial shocks. Conversely, losses lessen a bank's ability to do those things.

United Southern Bank beat the national average on Bankrate's earnings test, achieving a score of 16 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 total equity. United Southern Bank's most recent annualized quarterly return on equity was 7.18 percent, below the national average of 8.10 percent.

The bank recorded net income of $3.2 million on total equity of $44.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.63 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.