Safe and Sound

University Bank

Ann Arbor, MI
2
Star Rating
University Bank is an FDIC-insured bank founded in 1908 and currently based in Ann Arbor, MI. The bank has equity of $26.1 million on $226.8 million in assets, according to December 31, 2017, regulatory filings.

With 401 full-time employees, the bank holds loans and leases worth $119.1 million, including real estate loans of $117.1 million. U.S. bank customers currently have $187.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, University Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is essential. It acts as a bulwark against losses and provides protection for depositors when a bank is experiencing economic trouble. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, University Bank received a score of 2 out of a possible 30 points, lower than the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. University Bank's Tier 1 capital ratio was 12.12 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, University Bank held equity amounting to 10.18 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

Having lots of these types of assets suggests a bank may eventually have to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the chances of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.57 percent of University 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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on University 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, expanding its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, University Bank scored 0 out of a possible 30, less than the national average of 15.12.

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 University Bank was 25.71 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $5.2 million on total equity of $26.1 million. The bank had an annualized return on average assets, or ROA, of 2.18 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.