Safe and Sound

Bank Star

Pacific, MO
4
Star Rating
Bank Star is an FDIC-insured bank founded in 1975 and currently based in Pacific, MO. The bank holds equity of $7.7 million on $79.3 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 14 full-time employees, the bank holds loans and leases worth $50.0 million, $44.4 million of which are for real estate. The bank currently holds $71.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Bank Star exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial strength. It acts as a buffer against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

Bank Star received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Bank Star's Tier 1 capital ratio was 18.17 percent, exceeding 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, Bank Star held equity amounting to 9.76 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 capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

A bank with a large number of these types of assets could eventually be required to use capital to absorb losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.

Bank Star beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.02 percent of Bank Star'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 troubled assets . 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 problem loans. Bank Star's loan loss allowance was 5,000.00 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Bank Star scored 8 out of a possible 30, failing to reach the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Bank Star was 3.99 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $303,000 on total equity of $7.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.39 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.