Safe and Sound

Allegiance Bank

Houston, TX
4
Star Rating
Allegiance Bank is a Houston, TX-based, FDIC-insured bank started in 2007. The bank holds equity of $311.2 million on $2.86 billion in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $2.22 billion on deposit at 16 offices in TX run by 375 full-time employees. With that footprint, the bank has amassed loans and leases worth $2.25 billion, including real estate loans of $1.73 billion.

Overall, Bankrate believes that, as of December 31, 2017, Allegiance Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial resilience, capital is key. From a safety and soundness perspective, more capital is better.

On our test to measure capital adequacy, Allegiance Bank received a score of 10 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Allegiance Bank's Tier 1 capital ratio was 10.72 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, Allegiance Bank held equity amounting to 10.88 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets suggests a bank could eventually have to use capital to absorb losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

Allegiance Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.59 percent of Allegiance Bank's loans were noncurrent, meaning 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 deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used 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 Allegiance Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's test of earnings, Allegiance Bank scored 12 out of a possible 30, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) 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 Allegiance Bank was 6.34 percent, below the national average of 8.10 percent.

The bank earned net income of $18.4 million on total equity of $311.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.68 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.