Safe and Sound

The Citizens State Bank

Hugoton, KS
4
Star Rating
Started in 1913, The Citizens State Bank is an FDIC-insured bank based in Hugoton, KS. Regulatory filings show the bank having equity of $16.5 million on $125.2 million in assets, as of December 31, 2017.

Thanks to the efforts of 31 full-time employees, the bank holds loans and leases worth $86.9 million, $49.3 million of which are for real estate. The bank currently holds $108.6 million in deposits from U.S. customers.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is essential. It acts as a cushion against losses and as protection for depositors during times of economic instability for the bank. When looking at safety and soundness, more capital is better.

The Citizens State Bank beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 18 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. The Citizens State Bank's Tier 1 capital ratio was 16.74 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, The Citizens State Bank held equity amounting to 13.15 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 troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these types of assets means a bank could eventually have to use capital to absorb losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and elevating the risk of a failure in the future.

On Bankrate's test of asset quality, The Citizens State Bank scored 32 out of a possible 40 points, coming in below the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 4.04 percent of The Citizens State Bank'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 how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Citizens State 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 better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

The Citizens State Bank received below-average marks on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

One important way to measure 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 State Bank was 6.78 percent, below 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 $16.5 million. The bank experienced an annualized return on average assets, or ROA, of 0.92 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.