Safe and Sound

The Citizens State Bank of Ontonagon

Ontonagon, MI
4
Star Rating
Ontonagon, MI-based The Citizens State Bank of Ontonagon is an FDIC-insured bank started in 1910. As of December 31, 2017, the bank held equity of $6.8 million on assets of $52.4 million.

Thanks to the efforts of 13 full-time employees in 3 offices in MI, the bank currently holds loans and leases worth $13.7 million, including $8.8 million worth of real estate loans. The bank currently holds $45.6 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Citizens State Bank of Ontonagon exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is valuable. It acts as a buffer against losses and as protection for depositors during periods of economic trouble for the bank. When it comes to safety and soundness, the more capital, the better.

The Citizens State Bank of Ontonagon exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 16 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. The Citizens State Bank of Ontonagon's Tier 1 capital ratio was 39.17 percent, exceeding the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, The Citizens State Bank of Ontonagon held equity amounting to 12.90 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem 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 be forced to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and increasing the risk of a failure in the future.

On Bankrate's test of asset quality, The Citizens State Bank of Ontonagon scored 36 out of a possible 40 points, less than the national average of 37.49 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, 5.15 percent of The Citizens State Bank of Ontonagon'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 troubled assets . Comparing the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Citizens State Bank of Ontonagon's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings can be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's test of earnings, The Citizens State Bank of Ontonagon scored 4 out of a possible 30, coming in below 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 most recent annualized quarterly return on equity for The Citizens State Bank of Ontonagon was 1.61 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $109,000 on total equity of $6.8 million. The bank reported an annualized return on average assets, or ROA, of 0.20 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.