Valley Bank reported Friday a 25 percent drop in quarterly profit but an uptick in loans being paid on time.

The Roanoke-based company, Valley Financial Corp., earned $688,000, or 15 cents a share, during the April-June quarter, compared with $918,000, or 22 cents a share, in the same period of 2007.

Nonperforming assets -- mostly loans not being paid on time -- amounted to 0.33 percent of total assets, an improvement over conditions a year ago when the figure was 1.48 percent.

President and Chief Executive Officer Ellis Gutshall said he is concerned about the depressed real estate market and that about half of the nonperforming loans are late mortgages.

Asked his outlook on the economy, Gutshall said: "I think we're near the bottom, but I would not be surprised to see it [troubles in real estate] continue on for another quarter."

As many banks are doing, Valley Bank covered possible bad debt by beefing up its loan loss reserve. It shifted $388,000 there for the recent quarter, three times the amount committed during the same quarter of 2007.

The bank is still growing. Total assets increased to $630.2 million, while deposits swelled to nearly $449 million, up 8 percent in both cases.

In a special message to customers with large holdings, the bank announced in its news release full protection from the Federal Deposit Insurance Corp. for large deposits.

FDIC insurance covers the first $100,000 in an account. But under a program through Promontory Interfinancial Network of Washington, D.C., recently made available to Valley Bank customers, the bank splits large investments into certificates of deposit of less than $100,000 each.

That way, all the funds have the protection, the bank said.