Safe and Sound

Cumberland Security Bank, Inc.

Somerset, KY
5
Star Rating
Cumberland Security Bank, Inc. is a Somerset, KY-based, FDIC-insured bank started in 1909. As of December 31, 2017, the bank had equity of $25.2 million on assets of $190.5 million.

Thanks to the efforts of 60 full-time employees in 4 offices in KY, the bank holds loans and leases worth $151.4 million, $130.8 million of which are for real estate. U.S. bank customers currently have $164.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Cumberland Security Bank, Inc. exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for account holders during periods of economic trouble for the bank. It follows then that when it comes to measuring an a bank's financial strength, capital is valuable. From a safety and soundness perspective, the higher the capital, the better.

Cumberland Security Bank, Inc. racked up 18 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Cumberland Security Bank, Inc.'s Tier 1 capital ratio was 16.85 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, Cumberland Security Bank, Inc. held equity amounting to 13.25 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended 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 unpaid loans.

A bank with large numbers of these kinds of assets may eventually be required to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Cumberland Security Bank, Inc. scored 40 out of a possible 40 points, better than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, none of Cumberland Security Bank, Inc.'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 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 problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Cumberland Security Bank, Inc.'s loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, Cumberland Security Bank, Inc. scored 28 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Cumberland Security Bank, Inc. was 20.15 percent, above the national average of 8.10 percent.

The bank reported net income of $5.0 million on total equity of $25.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 2.64 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.