Safe and Sound

Central State Bank

Clayton, IL
5
Star Rating
Central State Bank is an FDIC-insured bank started in 1928 and currently based in Clayton, IL. The bank has equity of $19.2 million on assets of $134.9 million, according to December 31, 2017, regulatory filings.

With 29 full-time employees in 4 offices in IL, the bank currently holds loans and leases worth $118.7 million, including real estate loans of $78.4 million. U.S. bank customers currently have $111.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Central State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to grade 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 buffer against losses and as protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial fortitude, capital is valuable. From a safety and soundness perspective, the more capital, the better.

Central State Bank scored 20 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Central State Bank's Tier 1 capital ratio was 17.87 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 stand up to economic difficulties.

Overall, Central State Bank held equity amounting to 14.24 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

Having a large number of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, decreasing its cushion of equity. 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 risk of a future failure.

On Bankrate's asset quality test, Central State Bank scored 28 out of a possible 40 points, below the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 2.52 percent of Central State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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 . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Central State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Central State Bank received above-average marks on Bankrate's test of earnings, achieving a score of 26 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The most recent annualized quarterly return on equity for Central State Bank was 17.45 percent, above the national average of 8.10 percent.

The bank earned net income of $3.3 million on total equity of $19.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 2.51 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.