Safe and Sound

The Citizens Bank

Morehead, KY
4
Star Rating
Morehead, KY-based The Citizens Bank is an FDIC-insured bank founded in 1928. The bank has equity of $12.7 million on $137.2 million in assets, according to December 31, 2017, regulatory filings.

With 43 full-time employees in 5 offices in KY, the bank currently holds loans and leases worth $106.5 million, including real estate loans of $94.8 million. U.S. bank customers currently have $110.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Citizens Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for account holders during periods of economic trouble for the bank. Therefore, when it comes to measuring an a bank's financial fortitude, capital is useful. From a safety and soundness perspective, the more capital, the better.

The Citizens Bank received a score of 6 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The Citizens Bank's Tier 1 capital ratio was 12.51 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 economic challenges.

Overall, The Citizens Bank held equity amounting to 9.29 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 impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

The Citizens Bank finished below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.23 percent of The Citizens Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Citizens Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

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

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for The Citizens Bank was 8.66 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.1 million on total equity of $12.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.80 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.