Safe and Sound

Citizens & Northern Bank

Wellsboro, PA
5
Star Rating
Citizens & Northern Bank is a Wellsboro, PA-based, FDIC-insured bank founded in 1864. Regulatory filings show the bank having equity of $166.6 million on assets of $1.26 billion, as of December 31, 2017.

U.S. bank customers have $1.02 billion on deposit at 26 offices in multiple states run by 296 full-time employees. With that footprint, the bank has amassed loans and leases worth $807.6 million, including $636.8 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Citizens & Northern Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is valuable. It works as a bulwark against losses and as protection for accountholders during times of financial trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.

Citizens & Northern Bank racked up 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Citizens & Northern Bank's Tier 1 capital ratio was 19.34 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, Citizens & Northern Bank held equity amounting to 13.19 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended 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 a large number of these kinds of assets could eventually require a bank to use capital to cover 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, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Citizens & Northern Bank scored 36 out of a possible 40 points, lower than the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.10 percent of Citizens & Northern 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 . Comparing how large that reserve is to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Citizens & Northern 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, boosting its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial trouble. Conversely, losses diminish a bank's ability to do those things.

Citizens & Northern Bank beat the national average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Citizens & Northern Bank was 8.00 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $13.4 million on total equity of $166.6 million. The bank experienced an annualized return on average assets, or ROA, of 1.08 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.