Safe and Sound

Texas Star Bank

Van Alstyne, TX
5
Star Rating
Texas Star Bank is an FDIC-insured bank started in 1890 and currently based in Van Alstyne, TX. As of December 31, 2017, the bank held equity of $41.3 million on assets of $390.2 million.

Thanks to the efforts of 95 full-time employees in 7 offices in TX, the bank currently holds loans and leases worth $283.6 million, including real estate loans of $163.6 million. U.S. bank customers currently have $341.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Texas Star Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is experiencing economic instability. Therefore, when it comes to measuring an a bank's financial fortitude, capital is crucial. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Texas 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 widely used measure of this buffer. Texas Star Bank's Tier 1 capital ratio was 13.92 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Texas Star Bank held equity amounting to 10.60 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

A bank with large numbers of these types of assets could eventually have to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a future failure.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.35 percent of Texas Star 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 keep 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 Texas Star Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Texas Star Bank scored 20 out of a possible 30, exceeding the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. Texas Star Bank's most recent annualized quarterly return on equity was 11.57 percent, above the national average of 8.10 percent.

The bank reported net income of $4.6 million on total equity of $41.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.23 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.