Safe and Sound

Citizens National Bank of Cheboygan

Cheboygan, MI
4
Star Rating
Citizens National Bank of Cheboygan is an FDIC-insured bank founded in 1931 and currently headquartered in Cheboygan, MI. Regulatory filings show the bank having equity of $23.0 million on assets of $290.0 million, as of December 31, 2017.

U.S. bank customers have $262.2 million on deposit at 10 offices in MI run by 68 full-time employees. With that footprint, the bank holds loans and leases worth $139.9 million, including real estate loans of $126.0 million.

Overall, Bankrate believes that, as of December 31, 2017, Citizens National Bank of Cheboygan exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial resilience. It acts as a buffer against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

Citizens National Bank of Cheboygan fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 6 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Citizens National Bank of Cheboygan's Tier 1 capital ratio was 17.77 percent, above 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 challenges.

Overall, Citizens National Bank of Cheboygan held equity amounting to 7.94 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these types of assets means a bank could have to use capital to absorb losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the chances of a failure in the future.

Citizens National Bank of Cheboygan did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.32 percent of Citizens National Bank of Cheboygan's loans were noncurrent -- in other words, 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 keep a reserve to deal with troubled 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 problem loans. Unfortunately, the FDIC did not provide information on Citizens National Bank of Cheboygan's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses take away from a bank's ability to do those things.

Citizens National Bank of Cheboygan underperformed the average on Bankrate's earnings test, achieving a score of 12 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Citizens National Bank of Cheboygan was 5.77 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.3 million on total equity of $23.0 million. The bank experienced an annualized return on average assets, or ROA, of 0.47 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.