Safe and Sound

Macatawa Bank

Holland, MI
5
Star Rating
Macatawa Bank is an FDIC-insured bank founded in 1997 and currently headquartered in Holland, MI. As of June 30, 2017, the bank held equity of $204.2 million on $1,757,422,000 in assets.

Thanks to the efforts of 345 full-time employees in 30 offices in MI, the bank currently holds loans and leases worth $1.24 billion, including $803.7 million worth of real estate loans. The bank currently holds $1.47 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Macatawa Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three key criteria Bankrate used to score U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is useful. It works as a cushion against losses and provides protection for depositors when a bank is experiencing financial instability. From a safety and soundness perspective, the higher the capital, the better.
Macatawa Bank achieved a score of 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Macatawa Bank's Tier 1 capital ratio was 13.89 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Macatawa Bank held equity amounting to 11.62 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these kinds of assets could eventually be required to use capital to cover 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 money, pushing down earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Macatawa Bank scored 40 out of a possible 40 points, beating the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 0.05 percent of Macatawa 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 1.04 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Macatawa Bank's loan loss allowance was 2,473.13 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's earnings test, Macatawa Bank scored 18 out of a possible 30, above the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. Macatawa Bank's most recent annualized quarterly return on equity was 9.96 percent, above the national average of 9.28 percent.

The bank reported net income of $10.0 million on total equity of $204.2 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.14 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and equal to the average for U.S. banks of 1.14 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.