Safe and Sound

First Bank, Upper Michigan

Gladstone, MI
4
Star Rating
Founded in 1916, First Bank, Upper Michigan is an FDIC-insured bank based in Gladstone, MI. Regulatory filings show the bank having equity of $55.8 million on assets of $457.1 million, as of December 31, 2017.

U.S. bank customers have $377.6 million on deposit at 10 offices in MI run by 121 full-time employees. With that footprint, the bank currently holds loans and leases worth $335.5 million, including $231.0 million worth of real estate loans.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an a bank's financial stability, capital is crucial. When it comes to safety and soundness, the more capital, the better.

First Bank, Upper Michigan received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. First Bank, Upper Michigan's Tier 1 capital ratio was 11.69 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, First Bank, Upper Michigan held equity amounting to 12.20 percent of its assets, which exceeded 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.

Having a large number of these kinds of assets may eventually require a bank to use capital to absorb losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and elevating the chances of a future failure.

First Bank, Upper Michigan scored 32 out of a possible 40 points on Bankrate's test of asset quality, failing to reach 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, 1.87 percent of First Bank, Upper Michigan's loans were noncurrent -- in other words, 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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First Bank, Upper Michigan's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand economic trouble. However, banks that are losing money are less able to do those things.

First Bank, Upper Michigan scored 20 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. First Bank, Upper Michigan's most recent annualized quarterly return on equity was 12.07 percent, above the national average of 8.10 percent.

The bank earned net income of $6.5 million on total equity of $55.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.45 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.