Safe and Sound

Spring Valley City Bank

Spring Valley, IL
5
Star Rating
Spring Valley City Bank is a Spring Valley, IL-based, FDIC-insured bank founded in 1905. The bank holds equity of $26.0 million on assets of $188.1 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 30 full-time employees, the bank has amassed loans and leases worth $83.8 million, $69.3 million of which are for real estate. The bank currently holds $158.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Spring Valley City Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for depositors when a bank is experiencing financial trouble. It follows then that a bank's level of capital is an essential measurement of an institution's financial strength. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Spring Valley City Bank racked up 18 out of a possible 30 points, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Spring Valley City Bank's Tier 1 capital ratio was 28.83 percent, exceeding the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Spring Valley City Bank held equity amounting to 13.80 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these types of assets may eventually have 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 thus aren't earning interest for the bank, diminishing earnings and elevating the risk of a failure in the future.

Spring Valley City Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding 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, 1.25 percent of Spring Valley City Bank's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Spring Valley City Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic shocks. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Spring Valley City Bank scored 12 out of a possible 30, failing to reach the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Spring Valley City Bank's most recent annualized quarterly return on equity was 4.95 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.3 million on total equity of $26.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.70 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.