United Bank of Iowa: Overview of the bank

Established in 1932 with $272 million of assets, United Bank of Iowa is a mid-sized bank whose main office is located in the city of Ida Grove in the state of Iowa. There are a total of 263 banks operating in the state of Iowa and combined these banks have $112 billion of assets. United Bank of Iowa has been operating for 90 years. The bank is a product of several acquisitions including Moorhead State Bank, Blencoe State Bank, First Trust & Savings Bank and most recently Heritage Bank N.A. The bank first got insured by the Federal Deposit Insurance Corporation in the year 1934 which is effectively the first year it was possible to get insured by the agency, which itself was founded in the prior year. The FDIC is also serves as the primary federal regulator for the bank. The bank is a community bank given its size, geographic reach and presence. We estimate that its asset base of $1,987 million ranks it in the 90th percentile of banks in the United States. United Bank of Iowa is a purely domestic bank and currently has 36 offices located in the United States. Finally, the bank currently has a total employee base of 294 people.

Discussion of the key components of the Bank’s Balance Sheet

As previously indicated, the bank currently has total assets of $1,987 million, which makes it a mid-sized bank in the United States. The bank also has net loans outstanding to customers of $1,294 million and a deposit base of $1,650 million. Approximately 7% of the bank’s deposits outstanding were transactional deposits, which is noteworthy given it implies that the vast majority of the banks deposit base is non-transactional. This indicates a high level of stability in the bank’s outstanding deposits.

Domestic depositors made up 100% of the bank’s total deposit base and 86% of the domestic deposits outstanding are insured. Outstanding loans to the bank’s customers makes up 66% of the bank’s assets. Within this, real estate loans represented 62% of the total and 100% of real estate loans were domestic. United Bank of Iowa has $148 million of outstanding 1-4 family residential loans (mortgages), which in total represents 11% of its loans outstanding. Loans to individuals and loans to commercial and industrial interests represent 4% and 6% of loans outstanding, respectively. Loans to farmland and farms represents 73% of loans outstanding – this is clearly the main focus of the bank’s lending activities.

Contact Information and Other Facts For United Bank of Iowa

  • Main Office Address: 501 2nd St., Ida Grove, IA 51445
  • Website: www.unitedbk.bank
  • Total Number of Branches: 36
  • Total Number of International Branches: None
  • Number of Employees: 294
  • FDIC Certificate Number: 958
  • FDIC Community Bank: Yes
  • FDIC Field Office: Sioux City
  • Independent or Subsidiary Bank: Independent
  • Federal Reserve ID Number: 738040
  • Bank Charter Class: NM
  • Primary Regulator: FDIC

Financial Overview

united bank of iowa-financial-metrics-sept-21

The bank had total assets of $1,987 million based on the latest available information. Its total assets have increased substantially over the past year, with an increase of 7.4%. In terms of the bank’s lending activities, net loans represented 65.1% of its total assets, and stood at $1,294 million. The bank’s loan portfolio has increased slightly over the past year, with an increase of 0.1%. Looking more closely at the loan portfolio, we see that residential mortgages comprise 11% of the bank’s loan book. The bank has $148 million of residential mortgages outstanding, which compares with $130 million in the prior year. This implies an increase of 13.9% over the past year. In addition, the bank provides loans to commercial and industrial businesses, which represents 5.5% of its total lending and stood at $72 million based on the latest available information. The bank also provides loans for farm-related activities, which currently amounts to 73.4% of its total loan portfolio and represented $965 million of outstanding loans. Among this, two thirds were loans for farmlands and one third were loans to farms. Finally, the bank also engages in the provision of auto loans which represent 3.3% of the bank’s total lending.

Bank Liquidity and Funding

Understanding a banks liquidity and funding is important to help assess the riskiness of a bank’s balance sheet. Customer deposits is usually one of the cheapest ways to finance a bank. This is especially the case for accounts that don’t pay interest, such as checking accounts. United Bank of Iowa has total customer deposits of $1,650 million. Looking over the past year, its deposit base has increased substantially with a growth rate of 8.1%. Furthermore, the bank has a loan to deposit ratio of 78% which is below the national average. Banks in the United States have a loan to deposit ratio of approximately 82%. A lower ratio is better since it means that a bank’s lending activities are more comfortably covered by its deposit base. The entirety of the bank’s deposit base stems from domestic depositors.

Bank Performance and Capital Metrics

united bank of iowa-performance-metrics-sept-21

The above chart provides a brief summary of some of the key performance metrics for United Bank of Iowa. Next to these metrics are the equivalent for the average U.S. bank. Starting with its return on assets, over the past year it has improved. Importantly, on this metric we can also see that the bank is above the average bank. Return on assets tells us how productive a bank is being with its asset base. Next, looking at the bank’s return on equity, which tells us how much of a return the bank has generated for its owners, over the past year it has improved. In addition, we can also see that the bank is above the average bank on this metric. Another metric that is helpful in contextualizing a bank’s return on equity is its leverage ratio. A lower ratio means that the bank has a higher reliance on borrowing to deliver its return on equity. In this case, the total leverage ratio is currently below the average U.S. bank, and has been relatively stable over the past year. Finally, we could not find United Bank of Iowa’s risk-weighted asset information for this period and therefore had to make some assumptions and estimates. We estimate that the bank had a tier 1 capital ratio of 16.7% which is approximately inline the average U.S. bank.

Final Thoughts: United Bank of Iowa

Overall, we believe United Bank of Iowa deserves a rating of 3.9 out of 5.0, which is a very good rating and is close to an exceptional rating. The bank’s funding cost and efficiency ratio are exceptional, especially its efficiency ratio which implies very tight cost controls. However the bank’s tier 1 capital is slightly below the average bank and its net interest margin and total leverage could also be stronger. That said, the bank has at least solid performance on each metric we focus on with no big areas of weaknesses. As a reminder, our rating is based on our proprietary scoring system which uses data from an in-depth nationwide bank study we performed. None of the work presented is intended to be investment advice or advice of any sort and is presented purely for informational purposes.