Safe and Sound

American Express Centurion Bank

Salt Lake City, UT
5
Star Rating
Started in 1989, American Express Centurion Bank is an FDIC-insured bank based in Salt Lake City, UT. The bank holds equity of $5.95 billion on $59.15 billion in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 301 full-time employees in 2 offices in UT, the bank currently holds loans and leases worth $44.83 billion, $0 of which are for real estate. The bank currently holds $23.68 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, American Express Centurion Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is crucial. It works as a buffer against losses and affords protection for accountholders when a bank is experiencing economic trouble. From a safety and soundness perspective, the more capital, the better.

American Express Centurion Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. American Express Centurion Bank's Tier 1 capital ratio was 12.69 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, American Express Centurion Bank held equity amounting to 10.07 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

A bank with lots of these types of assets may eventually be required to use capital to absorb losses, shrinking its equity cushion. 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, resulting in diminished earnings and potentially more risk of a failure in the future.

American Express Centurion Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.82 percent of American Express Centurion 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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on American Express Centurion Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand economic shocks. Obviously, banks that are losing money are less able to do those things.

American Express Centurion Bank received above-average marks on Bankrate's earnings test, achieving a score of 30 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. American Express Centurion Bank's most recent annualized quarterly return on equity was 28.74 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.81 billion on total equity of $5.95 billion. The bank experienced an annualized return on average assets, or ROA, of 4.45 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.