Safe and Sound

Central Bank of the Midwest

Lees Summit, MO
4
Star Rating
Central Bank of the Midwest is a Lees Summit, MO-based, FDIC-insured bank founded in 1985. The bank holds equity of $246.1 million on assets of $1.76 billion, according to December 31, 2017, regulatory filings.

With 323 full-time employees in 36 offices in multiple states, the bank has amassed loans and leases worth $1.17 billion, including real estate loans of $709.4 million. U.S. bank customers currently have $1.46 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Central Bank of the Midwest exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial fortitude. It works as a buffer against losses and as protection for depositors during periods of economic trouble for the bank. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Central Bank of the Midwest received a score of 8 out of a possible 30 points, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Central Bank of the Midwest's Tier 1 capital ratio was 10.73 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 suggests the bank will be better able to stand up to economic headwinds.

Overall, Central Bank of the Midwest held equity amounting to 14.02 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due mortgages.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to absorb losses, cutting down on its equity buffer. Many of those assets are also likely to be 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.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.43 percent of Central Bank of the Midwest's loans were noncurrent, meaning 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 troubled assets . Comparing how large that reserve is to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Central Bank of the Midwest's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's test of earnings, Central Bank of the Midwest scored 18 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. Central Bank of the Midwest's most recent annualized quarterly return on equity was 8.43 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $20.5 million on total equity of $246.1 million. The bank reported an annualized return on average assets, or ROA, of 1.17 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.