Safe and Sound

Bank of the Valley

Bellwood, NE
4
Star Rating
Bellwood, NE-based Bank of the Valley is an FDIC-insured bank started in 1984. Regulatory filings show the bank having equity of $21.2 million on assets of $239.8 million, as of December 31, 2017.

U.S. bank customers have $193.5 million on deposit at 5 offices in NE run by 39 full-time employees. With that footprint, the bank currently holds loans and leases worth $188.6 million, $92.9 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Bank of the Valley exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial fortitude, capital is valuable. When looking at safety and soundness, the higher the capital, the better.

Bank of the Valley fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of the Valley's Tier 1 capital ratio was 10.25 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial downturns.

Overall, Bank of the Valley held equity amounting to 8.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these types of assets means a bank may eventually have to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the chances of a future failure.

Bank of the Valley came in below the national average of 37.49 on Bankrate's asset quality test, racking up 36 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, 0.35 percent of Bank of the Valley'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 to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a handy 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 Bank of the Valley's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand financial trouble. Banks that are losing money, however, are less able to do those things.

Bank of the Valley scored 16 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Bank of the Valley was 7.54 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.6 million on total equity of $21.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.68 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.