Safe and Sound

The Valley State Bank

Belle Plaine, KS
4
Star Rating
The Valley State Bank is a Belle Plaine, KS-based, FDIC-insured bank that opened its doors in 1897. As of December 31, 2017, the bank had equity of $16.3 million on $123.2 million in assets.

Thanks to the work of 31 full-time employees in 4 offices in KS, the bank has amassed loans and leases worth $80.6 million, including $57.5 million worth of real estate loans. The bank currently holds $101.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Valley State 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 major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial resilience. It works as a buffer against losses and affords protection for depositors during times of financial trouble for the bank. When it comes to safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, The Valley State Bank achieved a score of 18 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The Valley State Bank's Tier 1 capital ratio was 20.91 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, The Valley State Bank held equity amounting to 13.25 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as past-due mortgages, 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 could eventually be forced to use capital to absorb losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a failure in the future.

The Valley State Bank beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.53 percent of The Valley State 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 the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Valley State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

The Valley State Bank did below-average on Bankrate's test of earnings, achieving a score of 10 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) 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 The Valley State Bank was 4.98 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $809,000 on total equity of $16.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.65 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.