Safe and Sound

Cumberland Valley National Bank & Trust Company

East Bernstadt, KY
4
Star Rating
Cumberland Valley National Bank & Trust Company is an East Bernstadt, KY-based, FDIC-insured bank that opened its doors in 1904. As of December 31, 2017, the bank held equity of $47.6 million on $464.1 million in assets.

With 135 full-time employees in 14 offices in KY, the bank holds loans and leases worth $325.7 million, including real estate loans of $262.2 million. U.S. bank customers currently have $412.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Cumberland Valley National Bank & Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is a useful measurement of an institution's financial resilience. From a safety and soundness perspective, the higher the capital, the better.

Cumberland Valley National Bank & Trust Company finished below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Cumberland Valley National Bank & Trust Company's Tier 1 capital ratio was 13.40 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Cumberland Valley National Bank & Trust Company held equity amounting to 10.26 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets may eventually have to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Cumberland Valley National Bank & Trust Company scored 36 out of a possible 40 points on Bankrate's asset quality test, falling short of the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.96 percent of Cumberland Valley National Bank & Trust Company'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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Cumberland Valley National Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Cumberland Valley National Bank & Trust Company fell short of the national average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Cumberland Valley National Bank & Trust Company was 3.79 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.8 million on total equity of $47.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.39 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.