Safe and Sound

Alliance Bank

Topeka, KS
4
Star Rating
Topeka, KS-based Alliance Bank is an FDIC-insured bank started in 1998. As of December 31, 2017, the bank had equity of $11.3 million on assets of $97.3 million.

With 21 full-time employees in 2 offices in KS, the bank holds loans and leases worth $73.4 million, including real estate loans of $56.3 million. U.S. bank customers currently have $85.5 million in deposits with the bank.

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. Here's a look at 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 is a key measurement of a bank's financial fortitude. It works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

Alliance Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Alliance Bank's Tier 1 capital ratio was 14.58 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Alliance Bank held equity amounting to 11.57 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these types of assets could eventually be required to use capital to cover losses, shrinking 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 future failure.

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

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, 1.01 percent of Alliance Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's exactly equal to the national average.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic 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 ability to earn money affects its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

Alliance Bank received below-average marks on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Alliance Bank was 6.41 percent, below the national average of 8.10 percent.

The bank earned net income of $703,000 on total equity of $11.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.67 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.