Safe and Sound

Alliance Bank

Cape Girardeau, MO
4
Star Rating
Alliance Bank is a Cape Girardeau, MO-based, FDIC-insured bank started in 1997. As of December 31, 2017, the bank held equity of $30.8 million on assets of $211.5 million.

Thanks to the efforts of 59 full-time employees in 4 offices in MO, the bank holds loans and leases worth $171.6 million, including $131.0 million worth of real estate loans. The bank currently holds $164.6 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Alliance Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to score American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors during periods of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is useful. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Alliance Bank racked up 20 out of a possible 30 points, beating the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Alliance Bank's Tier 1 capital ratio was 14.25 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, Alliance Bank held equity amounting to 14.56 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets may eventually be forced to use capital to absorb losses, diminishing its cushion of equity. 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.

Alliance Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.55 percent of Alliance 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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Alliance Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, likely making the bank better prepared to withstand economic shocks. Losses, on the other hand, reduce a bank's ability to do those things.

Alliance Bank scored 8 out of a possible 30 on Bankrate's earnings test, less than the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Alliance Bank was 3.93 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.2 million on total equity of $30.8 million. The bank had an annualized return on average assets, or ROA, of 0.60 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.