Gogebic Range Bank

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is experiencing economic instability. Therefore, when it comes to measuring an an institution's financial fortitude, capital is important. When looking at safety and soundness, more capital is preferred.

Gogebic Range Bank received a score of 10 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.

One important measure of this buffer is a bank's Tier 1 capital ratio. Gogebic Range Bank's Tier 1 capital ratio was 13.96 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, Gogebic Range Bank held equity amounting to 10.27 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

A bank with large numbers of these types of assets may eventually be forced to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Gogebic Range Bank scored 36 out of a possible 40 points, failing to reach the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.34 percent of Gogebic Range Bank'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 deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Gogebic Range Bank'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 cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial shocks. Conversely, losses take away from a bank's ability to do those things.

Gogebic Range Bank outperformed the average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Gogebic Range Bank was 14.77 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.7 million on total equity of $13.0 million. The bank reported an annualized return on average assets, or ROA, of 1.58 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.