Safe and Sound

First Independence Bank

Detroit, MI
4
Star Rating
First Independence Bank is a Detroit, MI-based, FDIC-insured bank started in 1970. As of December 31, 2017, the bank had equity of $25.9 million on $286.6 million in assets.

U.S. bank customers have $233.9 million on deposit at 3 offices in MI run by 91 full-time employees. With that footprint, the bank holds loans and leases worth $172.5 million, $116.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, First Independence Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis 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

When it comes to measuring an an institution's financial fortitude, capital is key. It works as a buffer against losses and provides protection for depositors during times of economic trouble for the bank. When looking at safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, First Independence Bank received a score of 4 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. First Independence Bank's Tier 1 capital ratio was 9.91 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 economic downturns.

Overall, First Independence Bank held equity amounting to 6.71 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 capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

A bank with extensive holdings of these types of assets may eventually be required to use capital to absorb losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

First Independence Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.46 percent of First Independence Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . 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 at-risk loans. Unfortunately, the FDIC did not provide information on First Independence Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

First Independence Bank scored 18 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important measure of a bank's earnings. First Independence Bank's most recent annualized quarterly return on equity was 9.20 percent, above the national average of 8.10 percent.

The bank earned net income of $1.7 million on total equity of $25.9 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.69 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.