Safe and Sound

CapStar Bank

3
Star Rating
Nashville, TN-based CapStar Bank is an FDIC-insured bank founded in 2008. The bank holds equity of $132.9 million on assets of $1.34 billion, according to December 31, 2017, regulatory filings.

With 175 full-time employees in 5 offices in TN, the bank currently holds loans and leases worth $1.01 billion, including real estate loans of $609.9 million. U.S. bank customers currently have $1.13 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, CapStar Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial strength. It works as a cushion against losses and provides protection for depositors when a bank is experiencing economic trouble. When looking at safety and soundness, the more capital, the better.

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

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. CapStar Bank's Tier 1 capital ratio was 8.98 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, CapStar Bank held equity amounting to 9.89 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets could eventually force a bank to use capital to absorb losses, shrinking its equity buffer. 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, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, CapStar Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.27 percent of CapStar 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 1.01 percent.

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

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money are less able to do those things.

CapStar Bank fell short of the national average on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for CapStar Bank was 1.71 percent, below the national average of 8.10 percent.

The bank reported net income of $2.1 million on total equity of $132.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.16 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.