Safe and Sound

San Luis Valley Federal Bank

Alamosa, CO
4
Star Rating
Alamosa, CO-based San Luis Valley Federal Bank is an FDIC-insured bank started in 1899. As of December 31, 2017, the bank had equity of $42.8 million on $264.9 million in assets.

With 59 full-time employees in 3 offices in CO, the bank has amassed loans and leases worth $163.9 million, including real estate loans of $153.0 million. U.S. bank customers currently have $220.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, San Luis Valley Federal Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important 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 affords protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial fortitude, capital is valuable. From a safety and soundness perspective, the more capital, the better.

San Luis Valley Federal Bank scored 24 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. San Luis Valley Federal Bank's Tier 1 capital ratio was 24.65 percent, exceeding the 6 percent level regulators consider adequate, but less 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, San Luis Valley Federal Bank held equity amounting to 16.14 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

Having extensive holdings of these types of assets suggests a bank could eventually have to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, San Luis Valley Federal Bank scored 36 out of a possible 40 points, coming in below 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, 1.04 percent of San Luis Valley Federal 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 to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on San Luis Valley Federal Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Conversely, losses lessen a bank's ability to do those things.

San Luis Valley Federal Bank fell short of the national average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for San Luis Valley Federal Bank was 3.78 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.6 million on total equity of $42.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.60 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.