Safe and Sound

Five Star Bank

Warsaw, NY
4
Star Rating
Five Star Bank is a Warsaw, NY-based, FDIC-insured bank founded in 1881. Regulatory filings show the bank having equity of $347.7 million on $3,859,183,000 in assets, as of June 30, 2017.

U.S. bank customers have $3.15 billion on deposit at 53 offices in NY run by 567 full-time employees. With that footprint, the bank holds loans and leases worth $2.49 billion, $1.29 billion of which are for real estate.

Overall, Bankrate believes that, as of June 30, 2017, Five Star Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors when a bank is experiencing financial instability. It follows then that a bank's level of capital is a key measurement of an institution's financial strength. When it comes to safety and soundness, the more capital, the better.
Five Star Bank fell short of the national average of 13.38 on our test to measure the adequacy of a bank's capital, achieving a score of 6 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Five Star Bank's Tier 1 capital ratio was 11.26 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Five Star Bank held equity amounting to 9.01 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

Having large numbers of these kinds of assets suggests a bank may have to use capital to cover losses, cutting down on 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, resulting in reduced earnings and potentially more risk of a future failure.

Five Star Bank did better than the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 0.50 percent of Five Star 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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Five Star Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

Five Star Bank received above-average marks on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Five Star Bank's most recent annualized quarterly return on equity was 9.62 percent, above the national average of 9.28 percent.

The bank earned net income of $15.9 million on total equity of $347.7 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.84 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.