Safe and Sound

CenBank

Buffalo Lake, MN
4
Star Rating
Started in 1893, CenBank is an FDIC-insured bank headquartered in Buffalo Lake, MN. As of December 31, 2017, the bank held equity of $4.9 million on $62.8 million in assets.

U.S. bank customers have $57.2 million on deposit at 3 offices in MN run by 16 full-time employees. With that footprint, the bank has amassed loans and leases worth $38.1 million, including $21.8 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, CenBank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is important. It works as a buffer against losses and provides protection for accountholders when a bank is experiencing financial trouble. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, CenBank received a score of 6 out of a possible 30 points, less than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. CenBank's Tier 1 capital ratio was 11.53 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, CenBank held equity amounting to 7.84 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with large numbers of these kinds of assets could eventually be forced to use capital to absorb losses, shrinking 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, diminishing earnings and increasing the risk of a future failure.

CenBank scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.08 percent of CenBank'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 troubled assets, especially when compared to the total amount of at-risk loans. CenBank's loan loss allowance was 1,296.55 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. CenBank's most recent annualized quarterly return on equity was 10.72 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $540,000 on total equity of $4.9 million. The bank reported an annualized return on average assets, or ROA, of 0.90 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.