Safe and Sound

United Valley Bank

Cavalier, ND
5
Star Rating
Cavalier, ND-based United Valley Bank is an FDIC-insured bank founded in 1905. The bank has equity of $24.3 million on $251.4 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 49 full-time employees in 6 offices in multiple states, the bank holds loans and leases worth $186.2 million, $97.7 million of which are for real estate. The bank currently holds $225.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, United Valley Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for account holders when a bank is experiencing financial trouble. It follows then that a bank's level of capital is a crucial measurement of a bank's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

United Valley Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. United Valley Bank's Tier 1 capital ratio was 11.05 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 economic headwinds.

Overall, United Valley Bank held equity amounting to 9.65 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as past-due loans, 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 could have to use capital to absorb losses, shrinking 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 money, decreasing earnings and increasing the risk of a future failure.

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

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, 0.14 percent of United 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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." 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 problematic loans. Unfortunately, the FDIC did not provide information on United Valley Bank'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, giving a boost to its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, United Valley Bank scored 22 out of a possible 30, better than 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. The most recent annualized quarterly return on equity for United Valley Bank was 13.72 percent, above the national average of 8.10 percent.

The bank reported net income of $3.3 million on total equity of $24.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.30 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.