Safe and Sound

Centennial Bank

Lubbock, TX
5
Star Rating
Centennial Bank is an FDIC-insured bank started in 1934 and currently based in Lubbock, TX. The bank has equity of $77.7 million on $746,202,000 in assets, according to June 30, 2017, regulatory filings.

Thanks to the work of 144 full-time employees in 12 offices in TX, the bank currently holds loans and leases worth $476.9 million, $346.1 million of which are for real estate. The bank currently holds $623.9 million in deposits from U.S. customers.

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 a look at how the bank did on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is experiencing economic trouble. Therefore, when it comes to measuring an a bank's financial strength, capital is valuable. From a safety and soundness perspective, the higher the capital, the better.
Centennial Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.38.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Centennial Bank's Tier 1 capital ratio was 13.70 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Centennial Bank held equity amounting to 10.41 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these types of assets may eventually be required to use capital to absorb losses, diminishing its buffer of equity. 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, pushing down earnings and elevating the chances of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, 0.63 percent of Centennial 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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used 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

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, potentially making the bank better prepared to withstand financial trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Centennial Bank scored 22 out of a possible 30 on Bankrate's test of earnings, above the national average of 16.52.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Centennial Bank was 13.14 percent, above the national average of 9.28 percent.

The bank reported net income of $5.1 million on total equity of $77.7 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 1.38 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.