Safe and Sound

Investar Bank

Baton Rouge, LA
5
Star Rating
Baton Rouge, LA-based Investar Bank is an FDIC-insured bank started in 2006. As of June 30, 2017, the bank had equity of $169.0 million on $1,223,917,000 in assets.

Thanks to the work of 157 full-time employees in 12 offices in LA, the bank currently holds loans and leases worth $925.6 million, including $750.2 million worth of real estate loans. U.S. bank customers currently have $897.4 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Investar Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank faired on the three major criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is essential. It acts as a cushion against losses and affords protection for accountholders when a bank is experiencing financial trouble. When it comes to safety and soundness, the higher the capital, the better.
On our test to measure the adequacy of a bank's capital, Investar Bank scored 18 out of a possible 30 points, beating the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Investar Bank's Tier 1 capital ratio was 16.20 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Investar Bank held equity amounting to 13.80 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

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

Having extensive holdings of these types of assets means a bank could have to use capital to absorb losses, diminishing its buffer 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 elevating the chances of a failure in the future.

On Bankrate's asset quality test, Investar Bank scored 40 out of a possible 40 points, exceeding the national average of 37.62 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.12 percent of Investar 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 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Investar Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

Investar Bank underperformed the average on Bankrate's earnings test, achieving a score of 12 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Investar Bank was 5.95 percent, below the national average of 9.28 percent.

The bank earned net income of $4.5 million on total equity of $169.0 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.75 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.