Safe and Sound

Unity Bank North

Red Lake Falls, MN
4
Star Rating
Red Lake Falls, MN-based Unity Bank North is an FDIC-insured bank founded in 1929. As of December 31, 2017, the bank held equity of $7.7 million on assets of $95.8 million.

U.S. bank customers have $82.5 million on deposit at 2 offices in MN run by 28 full-time employees. With that footprint, the bank holds loans and leases worth $77.0 million, including real estate loans of $53.5 million.

Overall, Bankrate believes that, as of December 31, 2017, Unity Bank North exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial fortitude, capital is important. From a safety and soundness perspective, the higher the capital, the better.

Unity Bank North fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 8 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Unity Bank North's Tier 1 capital ratio was 10.84 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Unity Bank North held equity amounting to 8.06 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

Having large numbers of these types of assets may eventually force a bank to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Unity Bank North scored 32 out of a possible 40 points, coming in below the national average of 37.49 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, 1.68 percent of Unity Bank North'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 keep 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 problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Unity Bank North's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

Unity Bank North did above-average on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Unity Bank North was 13.84 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.1 million on total equity of $7.7 million. The bank reported an annualized return on average assets, or ROA, of 1.15 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.