Safe and Sound

STAR Financial Bank

Fort Wayne, IN
5
Star Rating
STAR Financial Bank is a Fort Wayne, IN-based, FDIC-insured bank dating back to 1988. As of June 30, 2017, the bank held equity of $198.4 million on assets of $1.85 billion.

With 465 full-time employees in 39 offices in IN, the bank currently holds loans and leases worth $1.29 billion, including real estate loans of $767.1 million. U.S. bank customers currently have $1.57 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, STAR Financial Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for accountholders when a bank is experiencing economic instability. Therefore, a bank's level of capital is a useful measurement of an institution's financial fortitude. When looking at safety and soundness, the higher the capital, the better.
STAR Financial Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. STAR Financial Bank's Tier 1 capital ratio was 12.48 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, STAR Financial Bank held equity amounting to 10.71 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 reserves set aside to cover loan losses, as well as overall capitalization could be affected by troubled assets, such as past-due loans.

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, diminishing earnings and increasing the risk of a failure in the future.

STAR Financial Bank scored above the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.94 percent of STAR Financial 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 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 problematic loans. Unfortunately, the FDIC did not provide information on STAR Financial Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand economic trouble. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, STAR Financial Bank scored 18 out of a possible 30, exceeding the national average of 16.52.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. STAR Financial Bank's most recent annualized quarterly return on equity was 8.72 percent, below the national average of 9.28 percent.

The bank recorded net income of $8.4 million on total equity of $198.4 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.91 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.