Safe and Sound

Independent Bank

Grand Rapids, MI
4
Star Rating
Independent Bank is a Grand Rapids, MI-based, FDIC-insured bank that opened its doors in 1890. The bank holds equity of $269.5 million on assets of $2.78 billion, according to December 31, 2017, regulatory filings.

Thanks to the work of 842 full-time employees in 65 offices in MI, the bank holds loans and leases worth $2.04 billion, including real estate loans of $1.53 billion. U.S. bank customers currently have $2.43 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Independent Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial fortitude. It works as a buffer against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Independent Bank received a score of 10 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Independent Bank's Tier 1 capital ratio was 12.95 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, Independent Bank held equity amounting to 9.69 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.

Having a large number of these kinds of assets means a bank may have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the chances of a future failure.

On Bankrate's test of asset quality, Independent Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

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, 0.40 percent of Independent 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Independent Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

Independent Bank outperformed the average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Independent Bank's most recent annualized quarterly return on equity was 9.05 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $24.0 million on total equity of $269.5 million. The bank reported an annualized return on average assets, or ROA, of 0.90 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.