Safe and Sound

Carolina Alliance Bank

Spartanburg, SC
4
Star Rating
Spartanburg, SC-based Carolina Alliance Bank is an FDIC-insured bank started in 2007. Regulatory filings show the bank having equity of $78.1 million on assets of $685.4 million, as of December 31, 2017.

U.S. bank customers have $567.5 million on deposit at 7 offices in multiple states run by 119 full-time employees. With that footprint, the bank has amassed loans and leases worth $521.4 million, including $420.6 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Carolina Alliance Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial fortitude. It acts as a buffer against losses and provides protection for accountholders during times of economic trouble for the bank. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, Carolina Alliance Bank received a score of 12 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. Carolina Alliance Bank's Tier 1 capital ratio was 12.04 percent, above the 6 percent level considered adequate by regulators, but lower 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, Carolina Alliance Bank held equity amounting to 11.39 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, Carolina Alliance Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.54 percent of Carolina 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used 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 Carolina Alliance Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, potentially making the bank better able to withstand economic trouble. Obviously, banks that are losing money are less able to do those things.

Carolina Alliance Bank scored 14 out of a possible 30 on Bankrate's test of earnings, falling short of 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 the total amount of equity. The most recent annualized quarterly return on equity for Carolina Alliance Bank was 6.39 percent, below the national average of 8.10 percent.

The bank earned net income of $4.8 million on total equity of $78.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.71 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.