Safe and Sound

First Alliance Bank

Cordova, TN
3
Star Rating
First Alliance Bank is an FDIC-insured bank started in 1999 and currently based in Cordova, TN. Regulatory filings show the bank having equity of $13.8 million on $131.8 million in assets, as of December 31, 2017.

With 38 full-time employees in 4 offices in TN, the bank has amassed loans and leases worth $103.3 million, including real estate loans of $70.7 million. U.S. bank customers currently have $115.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Alliance Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial strength. It acts as a buffer against losses and provides protection for depositors during periods of economic trouble for the bank. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, First Alliance Bank received a score of 12 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. First Alliance Bank's Tier 1 capital ratio was 11.97 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, First Alliance Bank held equity amounting to 10.48 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 loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these types of assets may eventually be forced to use capital to cover losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

First Alliance Bank fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 28 out of a possible 40 points .

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, 2.56 percent of First 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 above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First Alliance Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. First Alliance Bank's most recent annualized quarterly return on equity was 3.83 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $519,000 on total equity of $13.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.40 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.