Safe and Sound

Valley Premier Bank

Hawley, MN
5
Star Rating
Founded in 1892, Valley Premier Bank is an FDIC-insured bank headquartered in Hawley, MN. The bank has equity of $10.3 million on $114.2 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $103.9 million on deposit at 2 offices in MN run by 28 full-time employees. With that footprint, the bank currently holds loans and leases worth $63.0 million, $40.4 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Valley Premier Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important 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 acts as a bulwark against losses and provides protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial resilience, capital is key. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Valley Premier Bank received a score of 10 out of a possible 30 points, failing to reach the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Valley Premier Bank's Tier 1 capital ratio was 15.99 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, Valley Premier Bank held equity amounting to 9.04 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having a large number of these types of assets means a bank may eventually have to use capital to absorb losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the chances of a failure in the future.

On Bankrate's test of asset quality, Valley Premier Bank scored 40 out of a possible 40 points, above the national average of 37.49 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, 0.57 percent of Valley Premier Bank'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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Valley Premier Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Valley Premier Bank scored 20 out of a possible 30, above the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Valley Premier Bank was 10.11 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.0 million on total equity of $10.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, and equal to 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.