Safe and Sound

Central Bank of Sedalia

Sedalia, MO
5
Star Rating
Central Bank of Sedalia is a Sedalia, MO-based, FDIC-insured bank started in 1883. Regulatory filings show the bank having equity of $37.7 million on assets of $415.5 million, as of December 31, 2017.

With 77 full-time employees in 6 offices in MO, the bank has amassed loans and leases worth $296.7 million, including real estate loans of $166.1 million. U.S. bank customers currently have $370.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Central Bank of Sedalia 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 key criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors during periods of financial instability for the bank. It follows then that a bank's level of capital is a key measurement of a bank's financial fortitude. From a safety and soundness perspective, more capital is better.

Central Bank of Sedalia finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 8 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Central Bank of Sedalia's Tier 1 capital ratio was 10.55 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Central Bank of Sedalia held equity amounting to 9.08 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 impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets could eventually be forced to use capital to cover losses, decreasing its cushion 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, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Central Bank of Sedalia scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.47 percent of Central Bank of Sedalia'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 . Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Central Bank of Sedalia's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Central Bank of Sedalia scored 22 out of a possible 30, better than the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Central Bank of Sedalia was 13.79 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $5.3 million on total equity of $37.7 million. The bank experienced an annualized return on average assets, or ROA, of 1.27 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.