Safe and Sound

Central State Bank

State Center, IA
5
Star Rating
Central State Bank is a State Center, IA-based, FDIC-insured bank that opened its doors in 1902. Regulatory filings show the bank having equity of $32.2 million on $260.2 million in assets, as of December 31, 2017.

With 24 full-time employees, the bank has amassed loans and leases worth $187.8 million, including real estate loans of $124.3 million. U.S. bank customers currently have $209.5 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. Here's an analysis of how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial strength, capital is important. From a safety and soundness perspective, the higher the capital, the better.

Central State Bank did better than the national average of 13.13 points on our test to measure capital adequacy, racking up 16 out of a possible 30 points.

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 12.23 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, Central State Bank held equity amounting to 12.39 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 capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

Having lots of these kinds of assets means a bank could have to use capital to cover losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

Central State Bank scored 36 out of a possible 40 points on Bankrate's asset quality test, falling short of the national average of 37.49.

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, 1.63 percent of Central State Bank's loans were noncurrent -- in other words, 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 problem assets . That reserve's size 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 State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Central State Bank scored 22 out of a possible 30, exceeding 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. The most recent annualized quarterly return on equity for Central State Bank was 13.49 percent, above the national average of 8.10 percent.

The bank reported net income of $4.2 million on total equity of $32.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.62 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.