Safe and Sound

Citizens Bank & Trust Co.

Hutchinson, MN
5
Star Rating
Started in 1886, Citizens Bank & Trust Co. is an FDIC-insured bank based in Hutchinson, MN. Regulatory filings show the bank having equity of $17.4 million on assets of $211.4 million, as of December 31, 2017.

Thanks to the efforts of 33 full-time employees in 3 offices in MN, the bank currently holds loans and leases worth $131.7 million, $90.1 million of which are for real estate. U.S. bank customers currently have $193.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Citizens Bank & Trust Co. exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders when a bank is experiencing economic trouble. It follows then that when it comes to measuring an an institution's financial strength, capital is essential. When looking at safety and soundness, more capital is better.

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

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Citizens Bank & Trust Co.'s Tier 1 capital ratio was 13.01 percent, exceeding 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 weather economic difficulties.

Overall, Citizens Bank & Trust Co. held equity amounting to 8.23 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 problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to cover losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

Citizens Bank & Trust Co. scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.70 percent of Citizens Bank & Trust Co.'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 deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is 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 Citizens Bank & Trust Co.'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 buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

Citizens Bank & Trust Co. exceeded the national average on Bankrate's test of earnings, achieving a score of 30 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Citizens Bank & Trust Co.'s most recent annualized quarterly return on equity was 20.04 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.5 million on total equity of $17.4 million. The bank experienced an annualized return on average assets, or ROA, of 1.67 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.