Safe and Sound

United Bank of Michigan

Grand Rapids, MI
4
Star Rating
United Bank of Michigan is an FDIC-insured bank founded in 1903 and currently headquartered in Grand Rapids, MI. As of December 31, 2017, the bank held equity of $60.1 million on assets of $615.9 million.

Thanks to the work of 139 full-time employees in 14 offices in MI, the bank has amassed loans and leases worth $524.4 million, including $481.3 million worth of real estate loans. The bank currently holds $474.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, United Bank of Michigan exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is experiencing financial trouble. It follows then that a bank's level of capital is a valuable measurement of an institution's financial resilience. When looking at safety and soundness, the more capital, the better.

United Bank of Michigan 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 way to measure this buffer is looking at a bank's Tier 1 capital ratio. United Bank of Michigan's Tier 1 capital ratio was 10.89 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, United Bank of Michigan held equity amounting to 9.75 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the risk of a future failure.

On Bankrate's asset quality test, United Bank of Michigan 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, 0.47 percent of United Bank of Michigan'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 to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on United Bank of Michigan'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, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, United Bank of Michigan scored 18 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. United Bank of Michigan's most recent annualized quarterly return on equity was 8.28 percent, above the national average of 8.10 percent.

The bank recorded net income of $4.8 million on total equity of $60.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.77 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.