Safe and Sound

Citizens Bank

Columbia, MS
5
Star Rating
Citizens Bank is a Columbia, MS-based, FDIC-insured bank that opened its doors in 1914. Regulatory filings show the bank having equity of $37.6 million on assets of $418.1 million, as of December 31, 2017.

U.S. bank customers have $364.4 million on deposit at 8 offices in MS run by 142 full-time employees. With that footprint, the bank has amassed loans and leases worth $326.0 million, including $261.1 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Citizens Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial stability, capital is crucial. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Citizens Bank received a score of 10 out of a possible 30 points, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Citizens Bank's Tier 1 capital ratio was 13.42 percent, higher than 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 financial downturns.

Overall, Citizens Bank held equity amounting to 9.00 percent of its assets, which was lower than 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 problem assets, such as unpaid mortgages.

Having lots of these kinds of assets may eventually force a bank to use capital to absorb losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Citizens Bank scored 36 out of a possible 40 points, falling short of 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, 1.25 percent of Citizens 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 to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Citizens Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

Citizens Bank did above-average on Bankrate's earnings test, achieving a score of 26 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. Citizens Bank's most recent annualized quarterly return on equity was 16.11 percent, above the national average of 8.10 percent.

The bank recorded net income of $6.2 million on total equity of $37.6 million for the twelve months ended December 31, 2017. The bank reported 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.