Safe and Sound

Community First Bank

Kennewick, WA
5
Star Rating
Founded in 1997, Community First Bank is an FDIC-insured bank based in Kennewick, WA. The bank has equity of $31.3 million on $305.1 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $273.4 million on deposit at 5 offices in WA run by 76 full-time employees. With that footprint, the bank currently holds loans and leases worth $172.5 million, including $149.5 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Community First Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial resilience. It works as a buffer against losses and provides protection for accountholders during times of economic instability for the bank. When it comes to safety and soundness, the more capital, the better.

Community First Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Community First Bank's Tier 1 capital ratio was 14.63 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Community First Bank held equity amounting to 10.24 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 problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Community First Bank scored 40 out of a possible 40 points, exceeding 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, 0.21 percent of Community First 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 . 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 at-risk loans. Unfortunately, the FDIC did not provide information on Community First Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Community First Bank scored 20 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Community First Bank's most recent annualized quarterly return on equity was 12.28 percent, above the national average of 8.10 percent.

The bank reported net income of $3.7 million on total equity of $31.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.27 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.