Safe and Sound

Edgewater Bank

Saint Joseph, MI
4
Star Rating
Edgewater Bank is a Saint Joseph, MI-based, FDIC-insured bank founded in 1910. As of December 31, 2017, the bank had equity of $13.7 million on assets of $156.4 million.

With 37 full-time employees in 5 offices in MI, the bank has amassed loans and leases worth $118.9 million, including real estate loans of $104.2 million. U.S. bank customers currently have $138.3 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial resilience. It works as a cushion against losses and as protection for accountholders during times of financial instability for the bank. From a safety and soundness perspective, more capital is preferred.

Edgewater Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Edgewater Bank's Tier 1 capital ratio was 14.20 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, Edgewater Bank held equity amounting to 8.77 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

A bank with lots of these kinds of assets could eventually be forced to use capital to cover losses, reducing 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, decreasing earnings and increasing the risk of a future failure.

Edgewater Bank scored below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.62 percent of Edgewater 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 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Edgewater Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Edgewater Bank scored 12 out of a possible 30, less than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Edgewater Bank's most recent annualized quarterly return on equity was 5.27 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $704,000 on total equity of $13.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.46 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.