Safe and Sound

United Cumberland Bank

Whitley City, KY
5
Star Rating
Whitley City, KY-based United Cumberland Bank is an FDIC-insured bank started in 1906. As of December 31, 2017, the bank held equity of $35.8 million on assets of $285.7 million.

With 99 full-time employees in 7 offices in multiple states, the bank has amassed loans and leases worth $187.3 million, including real estate loans of $141.8 million. U.S. bank customers currently have $232.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, United Cumberland Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is crucial. It works as a buffer against losses and affords protection for accountholders during periods of economic trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

United Cumberland Bank scored 16 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. United Cumberland Bank's Tier 1 capital ratio was 20.33 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, United Cumberland Bank held equity amounting to 12.54 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

A bank with lots of these kinds of assets may eventually be forced to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and elevating the risk of a future failure.

United Cumberland Bank scored 36 out of a possible 40 points on Bankrate's asset quality test, lower than the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 3.06 percent of United Cumberland Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on United Cumberland Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

United Cumberland Bank exceeded the national average on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for United Cumberland Bank was 13.30 percent, above the national average of 8.10 percent.

The bank recorded net income of $4.7 million on total equity of $35.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.64 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.