Safe and Sound

The Citizens Bank

Farmington, NM
5
Star Rating
The Citizens Bank is an FDIC-insured bank founded in 1905 and currently headquartered in Farmington, NM. The bank has equity of $69.5 million on assets of $703.5 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 126 full-time employees in 6 offices in NM, the bank currently holds loans and leases worth $253.2 million, $187.5 million of which are for real estate. The bank currently holds $549.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Citizens Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate 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 during periods of economic trouble for the bank. Therefore, when it comes to measuring an an institution's financial resilience, capital is useful. From a safety and soundness perspective, more capital is better.

The Citizens Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. The Citizens Bank's Tier 1 capital ratio was 22.12 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, The Citizens Bank held equity amounting to 9.88 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 capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

A bank with lots of these kinds of assets could eventually be forced to use capital to cover losses, diminishing 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 money, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, The Citizens Bank scored 40 out of a possible 40 points, beating out 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, 1.00 percent of The Citizens 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 1.01 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Citizens Bank'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, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, The Citizens Bank scored 24 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The Citizens Bank's most recent annualized quarterly return on equity was 15.96 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $11.1 million on total equity of $69.5 million. The bank reported an annualized return on average assets, or ROA, of 1.54 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.