Safe and Sound

Centennial Bank

Conway, AR
5
Star Rating
Centennial Bank is a Conway, AR-based, FDIC-insured bank founded in 1903. As of June 30, 2017, the bank had equity of $1.73 billion on assets of $10.86 billion.

With 1,551 full-time employees in 156 offices in multiple states, the bank currently holds loans and leases worth $7.75 billion, including real estate loans of $6.67 billion. U.S. bank customers currently have $7.86 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Centennial Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three major criteria Bankrate used to score 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 is an important measurement of a bank's financial strength. It acts as a buffer against losses and provides protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is better.
On our test to measure the adequacy of a bank's capital, Centennial Bank scored 16 out of a possible 30 points, better than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Centennial Bank's Tier 1 capital ratio was 14.70 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to economic challenges.

Overall, Centennial Bank held equity amounting to 15.90 percent of its assets, which exceeded the national average of 12.10 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.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to cover losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, reducing earnings and elevating the chances of a failure in the future.

On Bankrate's asset quality test, Centennial Bank scored 40 out of a possible 40 points, beating the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 0.60 percent of Centennial 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 1.04 percent.

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

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Losses, on the other hand, take away from a bank's ability to do those things.

Centennial Bank scored 20 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 16.52.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Centennial Bank was 13.79 percent, above the national average of 9.28 percent.

The bank recorded net income of $102.8 million on total equity of $1.73 billion for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.97 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.