Safe and Sound

Bank of the Bluegrass and Trust Company

Lexington, KY
5
Star Rating
Lexington, KY-based Bank of the Bluegrass and Trust Company is an FDIC-insured bank founded in 1972. Regulatory filings show the bank having equity of $30.2 million on assets of $241.3 million, as of December 31, 2017.

With 59 full-time employees in 3 offices in KY, the bank has amassed loans and leases worth $185.5 million, including real estate loans of $176.5 million. U.S. bank customers currently have $203.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of the Bluegrass and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors during periods of economic instability for the bank. Therefore, when it comes to measuring an an institution's financial resilience, capital is important. From a safety and soundness perspective, the more capital, the better.

Bank of the Bluegrass and Trust Company scored 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Bank of the Bluegrass and Trust Company's Tier 1 capital ratio was 16.89 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, Bank of the Bluegrass and Trust Company held equity amounting to 12.53 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these types of assets could eventually force a bank to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

Bank of the Bluegrass and Trust Company did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.71 percent of Bank of the Bluegrass and Trust Company'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 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 useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of the Bluegrass and Trust Company'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 may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Bank of the Bluegrass and Trust Company scored 18 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Bank of the Bluegrass and Trust Company's most recent annualized quarterly return on equity was 9.94 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.0 million on total equity of $30.2 million. The bank reported an annualized return on average assets, or ROA, of 1.27 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.