Safe and Sound

Scott Valley Bank

Yreka, CA
4
Star Rating
Started in 1912, Scott Valley Bank is an FDIC-insured bank headquartered in Yreka, CA. As of December 31, 2017, the bank had equity of $68.7 million on assets of $691.9 million.

With 113 full-time employees in 12 offices in multiple states, the bank has amassed loans and leases worth $429.7 million, including real estate loans of $353.1 million. U.S. bank customers currently have $611.6 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is useful. It acts as a buffer against losses and affords protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

Scott Valley Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Scott Valley Bank's Tier 1 capital ratio was 12.37 percent, above the 6 percent level considered adequate by regulators, 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, Scott Valley Bank held equity amounting to 9.92 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets could eventually be forced to use capital to cover losses, decreasing its cushion of equity. 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.

Scott Valley Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, below the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.27 percent of Scott Valley 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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Scott Valley Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Scott Valley Bank's most recent annualized quarterly return on equity was 5.61 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.8 million on total equity of $68.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.56 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.