Safe and Sound

AloStar Bank of Commerce

Birmingham, AL
5
Star Rating
AloStar Bank of Commerce is a Birmingham, AL-based, FDIC-insured bank that opened its doors in 2011. The bank holds equity of $195.7 million on $945,354,000 in assets, according to June 30, 2017, regulatory filings.

With 93 full-time employees, the bank holds loans and leases worth $772.6 million, including real estate loans of $210.7 million. U.S. bank customers currently have $703.9 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, AloStar Bank of Commerce exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank faired on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors during periods of economic instability for the bank. Therefore, when it comes to measuring an a bank's financial stability, capital is crucial. When it comes to safety and soundness, the higher the capital, the better.
AloStar Bank of Commerce scored 30 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. AloStar Bank of Commerce's Tier 1 capital ratio was 21.52 percent, exceeding 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 economic headwinds.

Overall, AloStar Bank of Commerce held equity amounting to 20.70 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

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

A bank with lots of these types of assets may eventually have 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 no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, AloStar Bank of Commerce scored 40 out of a possible 40 points, above the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 1.25 percent of AloStar Bank of Commerce's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on AloStar Bank of Commerce's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's test of earnings, AloStar Bank of Commerce scored 16 out of a possible 30, falling short of the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for AloStar Bank of Commerce was 7.29 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $7.0 million on total equity of $195.7 million. The bank had an annualized return on average assets, or ROA, of 1.48 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.