Safe and Sound

Macatawa Bank

Holland, MI
5
Star Rating
Holland, MI-based Macatawa Bank is an FDIC-insured bank started in 1997. The bank has equity of $207.1 million on $1.89 billion in assets, according to December 31, 2017, regulatory filings.

With 341 full-time employees in 30 offices in MI, the bank has amassed loans and leases worth $1.30 billion, including real estate loans of $842.5 million. U.S. bank customers currently have $1.58 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Macatawa Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is valuable. It acts as a bulwark against losses and as protection for depositors during times of financial trouble for the bank. When it comes to safety and soundness, the more capital, the better.

Macatawa Bank fell below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Macatawa Bank's Tier 1 capital ratio was 13.54 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, Macatawa Bank held equity amounting to 10.96 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with large numbers of these kinds of assets may eventually be forced to use capital to absorb losses, reducing its cushion 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, pushing down earnings and elevating the risk of a future failure.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.03 percent of Macatawa 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 problem assets . Comparing the size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Macatawa Bank's loan loss allowance was 4,202.53 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

Macatawa Bank outperformed the average on Bankrate's test of earnings, 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 (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Macatawa Bank was 8.76 percent, above the national average of 8.10 percent.

The bank recorded net income of $17.8 million on total equity of $207.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, and equal to 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.