Safe and Sound

The Citizens Bank of Valley Head

Valley Head, AL
2
Star Rating
Valley Head, AL-based The Citizens Bank of Valley Head is an FDIC-insured bank started in 1935. As of December 31, 2017, the bank held equity of $3.2 million on $26.7 million in assets.

U.S. bank customers have $23.5 million on deposit at 3 offices in AL run by 13 full-time employees. With that footprint, the bank currently holds loans and leases worth $15.0 million, including real estate loans of $9.3 million.

Overall, Bankrate believes that, as of December 31, 2017, The Citizens Bank of Valley Head exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is important. It works as a buffer against losses and affords protection for depositors during periods of financial trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

The Citizens Bank of Valley Head exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Citizens Bank of Valley Head's Tier 1 capital ratio was 22.42 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, The Citizens Bank of Valley Head held equity amounting to 11.88 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these types of assets means a bank may have to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

The Citizens Bank of Valley Head scored 24 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.49.

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, 2.65 percent of The Citizens Bank of Valley Head'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 . How large that reserve is can be a helpful 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 The Citizens Bank of Valley Head's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

The Citizens Bank of Valley Head scored 6 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for The Citizens Bank of Valley Head was 2.98 percent, below the national average of 8.10 percent.

The bank earned net income of $94,000 on total equity of $3.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.35 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.