Safe and Sound

Community Financial Services Bank

Benton, KY
4
Star Rating
Founded in 1890, Community Financial Services Bank is an FDIC-insured bank based in Benton, KY. The bank has equity of $95.9 million on assets of $1.06 billion, according to December 31, 2017, regulatory filings.

With 217 full-time employees in 6 offices in KY, the bank holds loans and leases worth $873.0 million, including real estate loans of $572.6 million. U.S. bank customers currently have $961.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Community Financial Services Bank 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 important criteria Bankrate used to evaluate American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is crucial. It acts as a bulwark against losses and provides protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

Community Financial Services Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Community Financial Services Bank's Tier 1 capital ratio was 10.58 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial downturns.

Overall, Community Financial Services Bank held equity amounting to 9.01 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due mortgages.

Having a large number of these types of assets may eventually force a bank to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and elevating the chances of a failure in the future.

On Bankrate's asset quality test, Community Financial Services Bank scored 40 out of a possible 40 points, beating 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, 0.58 percent of Community Financial Services Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below 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 reserve's size to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Community Financial Services Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

Community Financial Services Bank scored 18 out of a possible 30 on Bankrate's test of earnings, above the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for Community Financial Services Bank was 8.55 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $8.0 million on total equity of $95.9 million. The bank experienced an annualized return on average assets, or ROA, of 0.78 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.