Safe and Sound

Upper Peninsula State Bank

Escanaba, MI
5
Star Rating
Upper Peninsula State Bank is an FDIC-insured bank founded in 1902 and currently based in Escanaba, MI. As of December 31, 2017, the bank had equity of $31.7 million on $190.8 million in assets.

Thanks to the work of 42 full-time employees in 2 offices in MI, the bank has amassed loans and leases worth $121.0 million, including $103.3 million worth of real estate loans. U.S. bank customers currently have $151.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Upper Peninsula State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

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

On our test to measure the adequacy of a bank's capital, Upper Peninsula State Bank racked up 24 out of a possible 30 points, beating the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Upper Peninsula State Bank's Tier 1 capital ratio was 24.69 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Upper Peninsula State Bank held equity amounting to 16.61 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

Upper Peninsula State Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.49.

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, 0.94 percent of Upper Peninsula State 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is 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 Upper Peninsula State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's test of earnings, Upper Peninsula State Bank scored 14 out of a possible 30, lower 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 widely used measure of a bank's earnings. Upper Peninsula State Bank's most recent annualized quarterly return on equity was 6.40 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.0 million on total equity of $31.7 million. The bank had an annualized return on average assets, or ROA, of 1.08 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.