Safe and Sound

Citizens Community Bank

South Hill, VA
4
Star Rating
South Hill, VA-based Citizens Community Bank is an FDIC-insured bank started in 1999. The bank has equity of $22.2 million on assets of $213.2 million, according to June 30, 2017, regulatory filings.

With 62 full-time employees in 6 offices in multiple states, the bank currently holds loans and leases worth $174.1 million, including real estate loans of $150.0 million. U.S. bank customers currently have $185.5 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Citizens Community Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three key criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial strength. It works as a bulwark against losses and affords protection for accountholders when a bank is experiencing financial trouble. When looking at safety and soundness, the more capital, the better.
Citizens Community Bank fell short of the national average of 13.38 on our test to measure the adequacy of a bank's capital, receiving a score of 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Citizens Community Bank's Tier 1 capital ratio was 13.36 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Citizens Community Bank held equity amounting to 10.43 percent of its assets, which was lower than the national average of 12.10 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 loans.

Having lots of these types of assets means a bank could eventually have to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the chances of a future failure.

Citizens Community Bank beat out the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.58 percent of Citizens Community 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 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the that reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Citizens Community Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, potentially making the bank better able to withstand financial trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Citizens Community Bank scored 12 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 16.52.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Citizens Community Bank was 5.33 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $584,000 on total equity of $22.2 million. The bank had an annualized return on average assets, or ROA, of 0.55 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.