Safe and Sound

Cumberland Federal Bank, FSB

Cumberland, WI
5
Star Rating
Cumberland Federal Bank, FSB is an FDIC-insured bank founded in 1934 and currently headquartered in Cumberland, WI. As of December 31, 2017, the bank held equity of $15.3 million on assets of $131.2 million.

Thanks to the work of 18 full-time employees, the bank holds loans and leases worth $65.2 million, including $58.8 million worth of real estate loans. The bank currently holds $108.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Cumberland Federal Bank, FSB 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 major criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for account holders when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial strength, capital is useful. When it comes to safety and soundness, more capital is better.

Cumberland Federal Bank, FSB racked up 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Cumberland Federal Bank, FSB's Tier 1 capital ratio was 21.65 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, Cumberland Federal Bank, FSB held equity amounting to 11.65 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these kinds of assets could eventually have to use capital to cover losses, shrinking its equity buffer. 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 diminished earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Cumberland Federal Bank, FSB 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 widely used indicator of asset quality.As of December 31, 2017, 0.89 percent of Cumberland Federal Bank, FSB's loans were noncurrent -- in other words, 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." Comparing how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Cumberland Federal Bank, FSB's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial shocks. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, Cumberland Federal Bank, FSB scored 16 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Cumberland Federal Bank, FSB was 7.89 percent, below the national average of 8.10 percent.

The bank earned net income of $1.2 million on total equity of $15.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.90 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.