Safe and Sound

Valley Republic Bank

Bakersfield, CA
4
Star Rating
Started in 2009, Valley Republic Bank is an FDIC-insured bank based in Bakersfield, CA. As of December 31, 2017, the bank held equity of $56.2 million on $667.6 million in assets.

U.S. bank customers have $603.4 million on deposit at 4 offices in CA run by 86 full-time employees. With that footprint, the bank holds loans and leases worth $441.7 million, $352.5 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Valley Republic 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 key criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

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

Valley Republic Bank came in below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Valley Republic Bank's Tier 1 capital ratio was 10.42 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, Valley Republic Bank held equity amounting to 8.42 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 impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these kinds of assets could eventually be required to use capital to cover losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and increasing the risk of a future failure.

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

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, none of Valley Republic 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Valley Republic Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Valley Republic Bank scored 18 out of a possible 30, better than the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Valley Republic Bank was 9.89 percent, above the national average of 8.10 percent.

The bank earned net income of $5.3 million on total equity of $56.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.83 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.