SAFE & SOUND® STAR RATINGS™
Memorandum on findings
CFG COMMUNITY BANK
11 W. RIDGELY ROAD
LUTHERVILLE TIMONIUM, Maryland 21209STAR RATING:
Federal Reserve System Identifier 2471239
HOLDING COMPANY INFORMATION
(Based on data from the previous quarter.)
This bank is not owned by a holding company.
U.S. commercial banks are chartered under either federal or state jurisdiction for the purposes of accepting funds for deposit and extending loans to either individual or business borrowers. Banks are subject to credit, interest rate, and operational risk, and, because of both their public purpose and their importance to the nation’s economy, banks become the object of intense regulatory scrutiny.
U.S. thrift institutions are chartered under either federal or state jurisdiction for the primary purpose of utilizing deposited funds to issue loans secured by real estate. Currently, real estate-backed loans account for approximately 44% of total thrift industry assets, and one-to-four family residential mortgages comprise nearly 64% of the industry’s real estate loan portfolio. Thrift institutions are subject to credit, interest rate, and operational risk, and, during the last twenty years, thrifts have made great strides toward reducing historic mismatches between asset and liability maturities.
The Bankrate proprietary commercial bank rating model analyzes capitalization,
asset quality, earnings, and liquidity and produces composite and component
"Star" ratings that can be used as a measure of the rated entity's financial
safety and soundness. Additionally, early warning components of the model
highlight operating characteristics of immediate concern and recommended
follow-up actions. "The analyses are not adjusted for TARP funding and those
institutions receiving funds may receive ratings that would differ were the
TARP funds adjusted out of the analyses. You can check whether or not this
institution has received TARP funding and whether or not they have paid it
back at http://bailout.propublica.org/main/list/index."
|CFG COMMUNITY BANK|
Bank profitability is critical to building capital, establishing adequate loss reserves, and providing dividends to shareholders.
(1) = As a percentage of average assets
|Return on Equity||29.04||Very Healthy|
|Net Interest Margin||4.21||Higher Than Peer|
|Level of Non-interest Income (1)||5.43||Solid|
|Overhead (1)||5.49||Significantly Higher Than Average|
Note: All ratios are based on the latest four quarters of income and expense
Asset quality highlights
Asset quality is a major determinant of the viability of any banking institution. Poor asset quality will have a very direct impact upon the other components and bank regulators invest substantial amounts of time and resources in gauging the quality of a bank's loans and investments.
(2) = Nonperforming Assets/Equity plus Loss Reserves
|Nonperforming Asset Ratio (2)||9.05||Relatively Low|
|Loss Reserve Coverage (3)||90.17||Approximately Normal|
|Asset Growth Rate||21.79||Normal|
(3) = Loan Loss Reserves/Nonperforming Loans
Bank capitalization stands as a protection against loss for bank customers, creditors, shareholders, and the Federal Deposit Insurance Corporation (FDIC). Regulators place a high degree of importance upon assessments of capitalization and assign regulatory benchmarks as determinants of capital adequacy.
|Net Worth to Total Assets||12.27||Above Peer Norm|
|Regulatory Capital Ratio||16.14||Substantially Exceeded Requirement|
Liquidity provides funding for normal bank operations and represents a reserve for unanticipated disintermediation. Liquidity can be both an asset and a liability concept.
|Balance Sheet Liquidity||18.82||Below Normal|
|Purchased Liabilities||17.67||No Greater Than Average Dependence|
Early warning highlights
Early warning indicators identify areas of potential concern, which may lead to financial deterioration and thus, require inquiry or in-depth investigation.
For this bank we have noted:
- Commercial Real Estate and Construction Lending
OVERVIEW of Institution
Organized in 1997,
CFG COMMUNITY BANK is a
chartered banking institution, which, as of
reported $521.8500 million in total assets.
At that date, loans and deposits held by the bank amounted to
$354.8650 million and $450.3780 million,
respectively. The bank's
equity base of $64.0360 million produced an Equity/Assets ratio of
12.27%, as of that date.
Bankrate believes that, as of
this bank exhibited a superior condition, characterized by
very solid overall, sustainable profitability,
a very high measure of asset quality,
strong capitalization and
seemingly ample liquidity.
For the twelve months ended
the bank recorded net income
of $17.3010 million. The bank experienced a return on average assets (ROA) of
3.45% over the latest four quarters. Year earlier
twelve month results amounted to a net income
of $6.5270 million, or a
ROA over the most recent four quarters at that time. An ROA of at least 1.0% is deemed satisfactory in accordance with banking
industry standards, and the industry's annualized ROA for the twelve months
of 2013 was approximately 1.06% for commercial banks
and 1.06% for thrift institutions.
We have concluded that for the four quarters ending
the bank achieved a very healthy
return on equity.
We deem net interest margin to have been meaningfully higher than peer.
Noninterest income was solid.
We also observed overhead ratios that were significantly higher than average, and the composition of overhead should be thoroughly analyzed.
Importantly, net interest margins, noninterest income components, and overhead expense levels
represent operating factors that combine to impact overall operating results.
We have also noted that the bank's profitability improvement between the
twelve months ended
2012 and the
twelve months ended
2013 well exceeded
the banking industry peer comparison.
ASSET QUALITY ANALYSIS
The bank revealed, as previously stated, a very high measure of
asset quality. Our conclusion with respect to asset quality incorporates our analysis
of data depicting regional economic conditions as well as our computations of
a relatively low
2013 nonperforming asset ratio,
reserve coverage for nonperforming loans; and
apparently acceptable quality, or no greater than average,
holdings of commercial real estate and construction loans, two categories
that can intensify credit risk.
Commercial real estate and construction loans should be examined for:
- Loan underwriting and appraisal standards that differ from normal bank guidelines.
- Loan-to-value benchmarks deemed not in conformance with prudent underwriting requirements.
- Speculative construction activity.
- The deferral of interest payments during construction periods.
- The funding of the entire amount of construction costs and land valuation.
Other asset categories, such as farm and consumer loans, which may carry
more than usual default potential, should not have a substantial negative impact
upon future results.
Loan yield can measure financial reward versus credit risk. Excessive loan yield may be an
indicator of existing or future problems. Our loan review indicates that the bank has assumed a
seemingly prudent position between credit risk and financial reward.
For the one year period ended
2013, the bank reported
a better than normal rate of growth in equity capital.
Balance sheet structural changes, through the one year period of time ended
possibly had a negative impact upon
the bank's capital position. Our analytical methodology does take into account the quantity,
quality, and durability of net worth, and, as set forth above, we have determined, based upon
our series of tests, that the bank demonstrates
capitalization. We have calculated the bank's
Total Risk-Based Capital position, a computation used by industry regulators, and have concluded
that this bank substantially exceeded
the requirement, set by regulation, for this test.
2013, the bank displayed
balance sheet liquidity and a
No Greater Than Average Dependence
upon wholesale, or non-core liabilities, which include all borrowings, such as Federal Home
Loan Bank Advances, and CD's greater than $250,000.
Accounting principles require some securities to be categorized as "Available-for-Sale."
Changes in market value of these securities are reflected through the GAAP (Generally
Accepted Accounting Principles) net worth of the institution. Based upon the bank's
present balance sheet, changes in the value of the current level of securities reported
might not have a substantial impact
upon future net worth of the bank.
This bank has been rated
Positive factors that impacted that rating follow:
As noted previously, early warning indicators, possibly requiring specific
- Commercial Real Estate and Construction Lending
As stated, we have determined a composite Star rating for this bank of
, indicative of a
financial condition. At times, financial conditions of banks change rapidly and significantly.
Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings.
However, in view of early warning indicators set forth within this report, in combination with
the institution's financial data, we believe that the Star rating for this institution is
unlikely to change
within the ensuing twelve month period.