Safe and Sound

The Citizens National Bank of Park Rapids

Park Rapids, MN
5
Star Rating
The Citizens National Bank of Park Rapids is an FDIC-insured bank started in 1933 and currently based in Park Rapids, MN. The bank holds equity of $27.0 million on assets of $250.4 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 48 full-time employees, the bank currently holds loans and leases worth $204.4 million, $150.7 million of which are for real estate. U.S. bank customers currently have $218.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Citizens National Bank of Park Rapids exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important 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 an institution's financial fortitude, capital is key. It acts as a bulwark against losses and provides protection for accountholders when a bank is experiencing economic instability. From a safety and soundness perspective, the higher the capital, the better.

The Citizens National Bank of Park Rapids scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Citizens National Bank of Park Rapids's Tier 1 capital ratio was 14.57 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, The Citizens National Bank of Park Rapids held equity amounting to 10.78 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually be forced to use capital to absorb losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and increasing the risk of a future failure.

On Bankrate's asset quality test, The Citizens National Bank of Park Rapids scored 36 out of a possible 40 points, failing to reach 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, 1.17 percent of The Citizens National Bank of Park Rapids'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The Citizens National Bank of Park Rapids's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance 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. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, The Citizens National Bank of Park Rapids scored 22 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The Citizens National Bank of Park Rapids's most recent annualized quarterly return on equity was 13.95 percent, above the national average of 8.10 percent.

The bank recorded net income of $3.6 million on total equity of $27.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.45 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.