Safe and Sound

Five Star Bank

Rocklin, CA
5
Star Rating
Five Star Bank is a Rocklin, CA-based, FDIC-insured bank founded in 1999. Regulatory filings show the bank having equity of $101.7 million on $972.8 million in assets, as of December 31, 2017.

U.S. bank customers have $867.7 million on deposit at 6 offices in CA run by 87 full-time employees. With that footprint, the bank has amassed loans and leases worth $765.9 million, $678.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Five Star Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

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

On our test to measure the adequacy of a bank's capital, Five Star Bank received a score of 12 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Five Star Bank's Tier 1 capital ratio was 11.79 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Five Star Bank held equity amounting to 10.46 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having a large number of these kinds of assets means a bank may eventually have to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a future failure.

Five Star Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, better than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.40 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 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. 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 has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Conversely, losses take away from a bank's ability to do those things.

Five Star Bank scored 30 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Five Star Bank was 25.42 percent, above the national average of 8.10 percent.

The bank earned net income of $22.2 million on total equity of $101.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 2.43 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.