Safe and Sound

Alliance Bank

Topeka, KS
4
Star Rating
Topeka, KS-based Alliance Bank is an FDIC-insured bank founded in 1998. The bank holds equity of $10.9 million on assets of $99.8 million, according to June 30, 2017, regulatory filings.

With 21 full-time employees in 2 offices in KS, the bank holds loans and leases worth $69.3 million, including real estate loans of $52.5 million. U.S. bank customers currently have $88.4 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. Here's a look at how the bank faired on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for accountholders when a bank is experiencing economic instability. Therefore, when it comes to measuring an an institution's financial stability, capital is valuable. From a safety and soundness perspective, the more capital, the better.
Alliance Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Alliance Bank's Tier 1 capital ratio was 15.12 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Alliance Bank held equity amounting to 10.95 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets may eventually require a bank to use capital to cover losses, cutting down on its equity cushion. 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, pushing down earnings and elevating the risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of June 30, 2017, 0.71 percent 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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing the that reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Alliance Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing 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 underperformed the average on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Alliance Bank was 6.49 percent, below the national average of 9.28 percent.

The bank reported net income of $351,000 on total equity of $10.9 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 0.65 percent, below the 1 percent deemed satisfactory in accordance with industry standards and 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.