Safe and Sound

Cumberland Bank and Trust

Clarksville, TN
4
Star Rating
Cumberland Bank and Trust is a Clarksville, TN-based, FDIC-insured bank founded in 2001. The bank has equity of $21.2 million on assets of $173.6 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $150.6 million on deposit at 5 offices in TN run by 42 full-time employees. With that footprint, the bank holds loans and leases worth $132.8 million, $115.4 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Cumberland Bank and Trust exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared 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

Capital works as a cushion against losses and affords protection for account holders during times of financial instability for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is essential. When looking at safety and soundness, the more capital, the better.

Cumberland Bank and Trust racked up 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Cumberland Bank and Trust's Tier 1 capital ratio was 13.74 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Cumberland Bank and Trust held equity amounting to 12.20 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these types of assets may eventually require a bank to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Cumberland Bank and Trust exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.09 percent of Cumberland Bank and Trust'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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Cumberland Bank and Trust's loan loss allowance was 1,495.69 percent of its total noncurrent loans, exceeding the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, Cumberland Bank and Trust scored 12 out of a possible 30, falling short of the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Cumberland Bank and Trust was 6.00 percent, below the national average of 8.10 percent.

The bank earned net income of $1.2 million on total equity of $21.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.72 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.