Safe and Sound

Baybank

Gladstone, MI
4
Star Rating
Baybank is an FDIC-insured bank started in 1912 and currently based in Gladstone, MI. The bank has equity of $8.7 million on assets of $91.4 million, according to December 31, 2017, regulatory filings.

With 29 full-time employees in 3 offices in MI, the bank has amassed loans and leases worth $62.7 million, including real estate loans of $38.1 million. U.S. bank customers currently have $78.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Baybank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders during times of financial instability for the bank. It follows then that a bank's level of capital is an important measurement of a bank's financial resilience. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Baybank received a score of 10 out of a possible 30 points, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Baybank's Tier 1 capital ratio was 12.17 percent, above the 6 percent level considered adequate by regulators, 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, Baybank held equity amounting to 9.52 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 effect of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets may eventually be forced to use capital to absorb losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the risk of a failure in the future.

Baybank scored 36 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.54 percent of Baybank's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . 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 problem loans. Unfortunately, the FDIC did not provide information on Baybank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Baybank scored 18 out of a possible 30, above the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Baybank's most recent annualized quarterly return on equity was 8.49 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $731,000 on total equity of $8.7 million. The bank reported an annualized return on average assets, or ROA, of 0.82 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.