Safe and Sound

Valley Bank of Commerce

Roswell, NM
5
Star Rating
Valley Bank of Commerce is an FDIC-insured bank started in 1978 and currently headquartered in Roswell, NM. Regulatory filings show the bank having equity of $16.9 million on assets of $189.6 million, as of December 31, 2017.

Thanks to the efforts of 19 full-time employees in 3 offices in NM, the bank has amassed loans and leases worth $57.5 million, including $18.2 million worth of real estate loans. U.S. bank customers currently have $172.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Valley Bank of Commerce exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial fortitude. It works as a bulwark against losses and affords protection for depositors during periods of financial trouble for the bank. When looking at safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, Valley Bank of Commerce received a score of 8 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Valley Bank of Commerce's Tier 1 capital ratio was 27.50 percent, above the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, Valley Bank of Commerce held equity amounting to 8.92 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets could eventually force a bank 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, resulting in diminished earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.08 percent of Valley Bank of Commerce's loans were noncurrent -- in other words, 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Valley Bank of Commerce's loan loss allowance was 1,833.33 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

Valley Bank of Commerce scored 26 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Valley Bank of Commerce was 19.23 percent, above the national average of 8.10 percent.

The bank earned net income of $3.0 million on total equity of $16.9 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.67 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.