Safe and Sound

The Citizens National Bank of Somerset

Somerset, KY
4
Star Rating
Started in 1919, The Citizens National Bank of Somerset is an FDIC-insured bank based in Somerset, KY. The bank has equity of $39.9 million on assets of $395.5 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $325.2 million on deposit at 11 offices in KY run by 124 full-time employees. With that footprint, the bank has amassed loans and leases worth $248.4 million, including $207.5 million worth of real estate loans.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is essential. It acts as a cushion against losses and as protection for accountholders when a bank is experiencing economic trouble. When it comes to safety and soundness, more capital is better.

The Citizens National Bank of Somerset received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Citizens National Bank of Somerset's Tier 1 capital ratio was 15.28 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, The Citizens National Bank of Somerset held equity amounting to 10.09 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these types of assets may eventually have to use capital to absorb losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

The Citizens National Bank of Somerset scored 32 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

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, 1.33 percent of The Citizens National Bank of Somerset'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 troubled 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 problematic loans. Unfortunately, the FDIC did not provide information on The Citizens National Bank of Somerset's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic trouble. Conversely, losses reduce a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important measure of a bank's earnings. The Citizens National Bank of Somerset's most recent annualized quarterly return on equity was 14.11 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $5.5 million on total equity of $39.9 million. The bank reported an annualized return on average assets, or ROA, of 1.43 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.