Safe and Sound

Traditions Bank

Cullman, AL
4
Star Rating
Traditions Bank is an FDIC-insured bank founded in 2003 and currently based in Cullman, AL. As of December 31, 2017, the bank held equity of $34.0 million on assets of $330.3 million.

Thanks to the efforts of 73 full-time employees in 6 offices in AL, the bank currently holds loans and leases worth $269.5 million, including real estate loans of $197.8 million. U.S. bank customers currently have $292.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Traditions 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

When it comes to measuring an a bank's financial strength, capital is important. It acts as a buffer against losses and provides protection for depositors when a bank is experiencing economic instability. From a safety and soundness perspective, the more capital, the better.

Traditions Bank finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Traditions Bank's Tier 1 capital ratio was 13.06 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Traditions Bank held equity amounting to 10.30 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and increasing the risk of a failure in the future.

Traditions Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, below the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.46 percent of Traditions 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Traditions Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. 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. Losses, on the other hand, diminish a bank's ability to do those things.

Traditions Bank exceeded 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 (essentially, profit) 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 Traditions Bank was 9.51 percent, above the national average of 8.10 percent.

The bank earned net income of $3.1 million on total equity of $34.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.95 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.