Safe and Sound

Alliance Bank Central Texas

Waco, TX
4
Star Rating
Alliance Bank Central Texas is a Waco, TX-based, FDIC-insured bank started in 1939. Regulatory filings show the bank having equity of $22.2 million on $261.9 million in assets, as of December 31, 2017.

With 54 full-time employees in 4 offices in TX, the bank currently holds loans and leases worth $190.8 million, including real estate loans of $154.7 million. U.S. bank customers currently have $227.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Alliance Bank Central Texas exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders during times of economic instability for the bank. It follows then that when it comes to measuring an a bank's financial resilience, capital is key. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Alliance Bank Central Texas received a score of 6 out of a possible 30 points, failing to reach the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Alliance Bank Central Texas's Tier 1 capital ratio was 12.10 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Alliance Bank Central Texas held equity amounting to 8.46 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets means a bank may eventually have to use capital to absorb 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 money, pushing down earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, Alliance Bank Central Texas scored 36 out of a possible 40 points, less than the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.26 percent of Alliance Bank Central Texas'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 1.01 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 handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Alliance Bank Central Texas's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

Alliance Bank Central Texas scored 14 out of a possible 30 on Bankrate's earnings test, below the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Alliance Bank Central Texas's most recent annualized quarterly return on equity was 6.62 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.4 million on total equity of $22.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.58 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.