Safe and Sound

Alliance Bank

Sulphur Springs, TX
4
Star Rating
Sulphur Springs, TX-based Alliance Bank is an FDIC-insured bank started in 1927. Regulatory filings show the bank having equity of $68.8 million on assets of $746.3 million, as of June 30, 2017.

With 195 full-time employees in 12 offices in TX, the bank has amassed loans and leases worth $386.5 million, including real estate loans of $279.5 million. U.S. bank customers currently have $637.1 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Alliance Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank faired 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 provides protection for accountholders when a bank is experiencing financial trouble. It follows then that a bank's level of capital is a key measurement of a bank's financial strength. From a safety and soundness perspective, the more capital, the better.
Alliance Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.38.

A bank's Tier 1 capital ratio is an important measure of this buffer. Alliance Bank's Tier 1 capital ratio was 14.29 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Alliance Bank held equity amounting to 9.22 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these types of assets may eventually have to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

Alliance Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, better than the national average of 37.62.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, none of Alliance 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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the that reserve's size to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Alliance Bank's loan loss allowance was 56,977.78 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

Alliance Bank scored 20 out of a possible 30 on Bankrate's earnings test, beating out the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Alliance Bank's most recent annualized quarterly return on equity was 11.96 percent, above the national average of 9.28 percent.

The bank reported net income of $3.9 million on total equity of $68.8 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 1.08 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 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.