Safe and Sound

Powell Valley National Bank

Jonesville, VA
4
Star Rating
Powell Valley National Bank is a Jonesville, VA-based, FDIC-insured bank dating back to 1888. As of December 31, 2017, the bank held equity of $41.1 million on assets of $275.3 million.

Thanks to the work of 79 full-time employees in 5 offices in VA, the bank has amassed loans and leases worth $179.9 million, including real estate loans of $140.4 million. The bank currently holds $231.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Powell Valley National Bank 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 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 strength, capital is valuable. It acts 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.

Powell Valley National Bank scored above the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 20 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Powell Valley National Bank's Tier 1 capital ratio was 21.11 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Powell Valley National Bank held equity amounting to 14.94 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually be required to use capital to absorb losses, decreasing its equity buffer. 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 reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Powell Valley National Bank scored 36 out of a possible 40 points, failing to reach 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, 1.88 percent of Powell Valley National Bank's loans were noncurrent, meaning 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful 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 Powell Valley National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand economic trouble. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, Powell Valley National Bank scored 12 out of a possible 30, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Powell Valley National Bank was 4.80 percent, below the national average of 8.10 percent.

The bank earned net income of $2.2 million on total equity of $41.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.79 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.