Safe and Sound

Alliance Bank & Trust Company

Gastonia, NC
3
Star Rating
Started in 2004, Alliance Bank & Trust Company is an FDIC-insured bank based in Gastonia, NC. Regulatory filings show the bank having equity of $11.0 million on assets of $142.5 million, as of December 31, 2017.

U.S. bank customers have $128.1 million on deposit at 6 offices in NC run by 31 full-time employees. With that footprint, the bank holds loans and leases worth $99.5 million, including real estate loans of $88.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Alliance Bank & Trust Company exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is essential. It works as a buffer against losses and affords protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

Alliance Bank & Trust Company fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 6 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Alliance Bank & Trust Company's Tier 1 capital ratio was 10.26 percent, higher than 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 financial downturns.

Overall, Alliance Bank & Trust Company held equity amounting to 7.73 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

Having large numbers of these kinds of assets means a bank may eventually have to use capital to cover losses, decreasing its equity cushion. 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 & Trust Company scored 32 out of a possible 40 points on Bankrate's test of asset quality, coming in below the national average of 37.49.

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, 2.21 percent of Alliance Bank & Trust Company'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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Alliance Bank & Trust Company'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, boosting its capital cushion, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, Alliance Bank & Trust Company scored 16 out of a possible 30, better than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Alliance Bank & Trust Company's most recent annualized quarterly return on equity was 8.24 percent, above the national average of 8.10 percent.

The bank earned net income of $865,000 on total equity of $11.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.61 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.