Safe and Sound

The First Bank of Alabama

Talladega, AL
5
Star Rating
Talladega, AL-based The First Bank of Alabama is an FDIC-insured bank founded in 1848. Regulatory filings show the bank having equity of $81.6 million on assets of $554.4 million, as of December 31, 2017.

Thanks to the efforts of 79 full-time employees in 6 offices in AL, the bank has amassed loans and leases worth $303.8 million, $252.0 million of which are for real estate. The bank currently holds $464.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The First Bank of Alabama exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial fortitude. It works as a bulwark against losses and as protection for depositors when a bank is experiencing economic trouble. When looking at safety and soundness, the higher the capital, the better.

The First Bank of Alabama racked up 18 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. The First Bank of Alabama's Tier 1 capital ratio was 22.19 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, The First Bank of Alabama held equity amounting to 14.72 percent of its assets, which exceeded 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 troubled assets, such as past-due loans.

Having lots of these kinds of assets means a bank could have to use capital to absorb losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, The First Bank of Alabama scored 40 out of a possible 40 points, exceeding the national average of 37.49 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, 0.37 percent of The First Bank of Alabama's loans were noncurrent -- in other words, 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 to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used 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 The First Bank of Alabama's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

The First Bank of Alabama beat the national average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for The First Bank of Alabama was 10.41 percent, above the national average of 8.10 percent.

The bank earned net income of $6.8 million on total equity of $81.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.57 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.