Safe and Sound

The Blue Grass Valley Bank

Blue Grass, VA
2
Star Rating
Started in 1915, The Blue Grass Valley Bank is an FDIC-insured bank headquartered in Blue Grass, VA. The bank holds equity of $4.6 million on $44.3 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 11 full-time employees in 2 offices in VA, the bank holds loans and leases worth $28.6 million, including $21.4 million worth of real estate loans. The bank currently holds $39.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Blue Grass Valley Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is experiencing economic trouble. It follows then that when it comes to measuring an an institution's financial fortitude, capital is valuable. From a safety and soundness perspective, the more capital, the better.

The Blue Grass Valley Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Blue Grass Valley Bank's Tier 1 capital ratio was 16.63 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, The Blue Grass Valley Bank held equity amounting to 10.43 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having extensive holdings of these kinds of assets means a bank may eventually have to use capital to absorb 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 no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, The Blue Grass Valley Bank scored 20 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 helpful indicator of asset quality.As of December 31, 2017, 6.53 percent of The Blue Grass Valley 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Blue Grass Valley Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic trouble. Losses, on the other hand, diminish a bank's ability to do those things.

The Blue Grass Valley Bank scored 6 out of a possible 30 on Bankrate's test of earnings, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The Blue Grass Valley Bank's most recent annualized quarterly return on equity was 2.71 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $127,000 on total equity of $4.6 million. The bank experienced an annualized return on average assets, or ROA, of 0.29 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.