Safe and Sound

Valley National Bank

Passaic, NJ
4
Star Rating
Passaic, NJ-based Valley National Bank is an FDIC-insured bank founded in 1927. As of June 30, 2017, the bank held equity of $2.54 billion on assets of $23.41 billion.

U.S. bank customers have $17.30 billion on deposit at 217 offices in multiple states run by 2,902 full-time employees. With that footprint, the bank currently holds loans and leases worth $17.73 billion, including real estate loans of $13.43 billion.

Overall, Bankrate believes that, as of June 30, 2017, 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 faired on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is useful. It works as a buffer against losses and provides protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.
Valley National Bank received a score of 6 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Valley National Bank's Tier 1 capital ratio was 10.47 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Valley National Bank held equity amounting to 10.86 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by problem assets, such as past-due loans.

A bank with lots of these kinds of assets could eventually be forced to use capital to cover losses, cutting down on its buffer of equity. 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 diminished earnings and potentially more risk of a future failure.

Valley National Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.62.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.54 percent of Valley National Bank'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 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used 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 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. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Valley National Bank scored 16 out of a possible 30, falling short of the national average of 16.52.

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 Valley National Bank was 7.62 percent, below the national average of 9.28 percent.

The bank recorded net income of $95.9 million on total equity of $2.54 billion for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 0.83 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.