Safe and Sound

Valley Bank

Glasgow, MT
4
Star Rating
Valley Bank is a Glasgow, MT-based, FDIC-insured bank dating back to 1989. As of December 31, 2017, the bank held equity of $3.8 million on assets of $39.6 million.

Thanks to the work of 11 full-time employees, the bank has amassed loans and leases worth $24.1 million, $15.1 million of which are for real estate. The bank currently holds $35.7 million in deposits from U.S. customers.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is useful. It works as a bulwark against losses and affords protection for depositors during periods of economic trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

Valley Bank scored below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Valley Bank's Tier 1 capital ratio was 17.58 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, Valley Bank held equity amounting to 9.55 percent of its assets, which was lower than 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 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 could eventually force a bank to use capital to absorb losses, diminishing its equity buffer. 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 failure in the future.

On Bankrate's test of asset quality, Valley Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 2.82 percent of Valley Bank's loans were noncurrent -- in other words, 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 problem assets . The size of that reserve can be a widely used 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 Valley Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

Valley Bank scored 8 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. Valley Bank's most recent annualized quarterly return on equity was 3.72 percent, below the national average of 8.10 percent.

The bank recorded net income of $142,000 on total equity of $3.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.37 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.