Safe and Sound

STAR Financial Bank

Fort Wayne, IN
4
Star Rating
Started in 1988, STAR Financial Bank is an FDIC-insured bank headquartered in Fort Wayne, IN. As of December 31, 2017, the bank held equity of $200.1 million on $1.92 billion in assets.

With 462 full-time employees in 39 offices in IN, the bank currently holds loans and leases worth $1.37 billion, including real estate loans of $818.9 million. U.S. bank customers currently have $1.61 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, STAR Financial Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is essential. It works as a buffer against losses and as protection for depositors when a bank is struggling financially. When it comes to 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 the adequacy of a bank's capital, below the national average of 13.13.

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 11.98 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, STAR Financial Bank held equity amounting to 10.42 percent of its assets, which was lower than the national average of 12.03 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.

A bank with a large number of these types of assets could eventually have to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a failure in the future.

On Bankrate's test of asset quality, STAR Financial Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 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, 0.89 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 1.01 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk 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. Earnings can be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

STAR Financial Bank received above-average marks on Bankrate's earnings test, achieving a score of 16 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for STAR Financial Bank was 8.17 percent, above the national average of 8.10 percent.

The bank reported net income of $16.0 million on total equity of $200.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.86 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.