Safe and Sound

Central Bank

Little Rock, AR
5
Star Rating
Central Bank is a Little Rock, AR-based, FDIC-insured bank founded in 1912. The bank has equity of $21.6 million on $189.7 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $156.1 million on deposit at 3 offices in AR run by 25 full-time employees. With that footprint, the bank holds loans and leases worth $124.6 million, $113.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Central 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 important 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 works as a cushion against losses and provides protection for account holders when a bank is experiencing financial trouble. It follows then that a bank's level of capital is a crucial measurement of a bank's financial strength. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Central Bank scored 14 out of a possible 30 points, exceeding the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Central Bank's Tier 1 capital ratio was 15.25 percent, exceeding 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, Central Bank held equity amounting to 11.37 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with large numbers of these kinds of assets may eventually be required to use capital to cover losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, Central Bank scored 36 out of a possible 40 points, lower than the national average of 37.49 points.

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, none of Central Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Central Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's test of earnings, Central Bank scored 20 out of a possible 30, above the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Central Bank's most recent annualized quarterly return on equity was 12.01 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.5 million on total equity of $21.6 million. The bank experienced an annualized return on average assets, or ROA, of 1.51 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.