Safe and Sound

Bluegrass Community Bank

2
Star Rating
Bluegrass Community Bank is a Danville, KY-based, FDIC-insured bank started in 2009. As of December 31, 2017, the bank held equity of $5.7 million on $56.2 million in assets.

U.S. bank customers have $46.1 million on deposit at 2 offices in KY run by 10 full-time employees. With that footprint, the bank currently holds loans and leases worth $32.2 million, including $27.7 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Bluegrass Community Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is valuable. It works as a buffer against losses and as protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Bluegrass Community Bank received a score of 12 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Bluegrass Community Bank's Tier 1 capital ratio was 17.11 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Bluegrass Community Bank held equity amounting to 10.07 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

A bank with extensive holdings of these types of assets could eventually be required to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a future failure.

Bluegrass Community Bank fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 points .

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, 2.56 percent of Bluegrass Community 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Bluegrass Community Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Bluegrass Community Bank scored 0 out of a possible 30 on Bankrate's earnings test, falling short of the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Bluegrass Community Bank was -12.11 percent, below the national average of 8.10 percent.

The bank earned net income of $-732,000 on total equity of $5.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of -1.16 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.