Safe and Sound

Central State Bank

Calera, AL
5
Star Rating
Central State Bank is a Calera, AL-based, FDIC-insured bank founded in 1916. As of December 31, 2017, the bank had equity of $30.6 million on $275.0 million in assets.

Thanks to the efforts of 68 full-time employees in 5 offices in AL, the bank currently holds loans and leases worth $186.1 million, including $162.2 million worth of real estate loans. The bank currently holds $240.9 million in deposits from U.S. customers.

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 fared on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is an important measurement of an institution's financial strength. When looking at safety and soundness, the more capital, the better.

Central State Bank did better than the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Central State Bank's Tier 1 capital ratio was 15.60 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Central State Bank held equity amounting to 11.11 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 impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

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

Central State Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding 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, 0.05 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 below the national average of 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Central State Bank's loan loss allowance was 2,675.25 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Central State Bank's most recent annualized quarterly return on equity was 13.12 percent, above the national average of 8.10 percent.

The bank reported net income of $3.9 million on total equity of $30.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.48 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.