Safe and Sound

Centennial Bank

Lubbock, TX
5
Star Rating
Centennial Bank is a Lubbock, TX-based, FDIC-insured bank founded in 1934. Regulatory filings show the bank having equity of $78.4 million on assets of $744.5 million, as of December 31, 2017.

U.S. bank customers have $638.1 million on deposit at 12 offices in TX run by 146 full-time employees. With that footprint, the bank has amassed loans and leases worth $506.4 million, including $369.4 million worth of real estate loans.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is key. It works as a cushion against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

Centennial Bank came in below the national average of 13.13 on our test to measure capital adequacy, scoring 12 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Centennial Bank's Tier 1 capital ratio was 13.64 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Centennial Bank held equity amounting to 10.53 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these kinds of assets could eventually require a bank 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 no longer earning money, reducing earnings and increasing the chances of a future failure.

Centennial Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.71 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 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. 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 affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Centennial Bank outperformed the average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. Centennial Bank's most recent annualized quarterly return on equity was 12.25 percent, above the national average of 8.10 percent.

The bank reported net income of $9.5 million on total equity of $78.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.29 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.