Safe and Sound

West Alabama Bank & Trust

Reform, AL
5
Star Rating
West Alabama Bank & Trust is a Reform, AL-based, FDIC-insured bank that opened its doors in 1944. Regulatory filings show the bank having equity of $79.6 million on $601.4 million in assets, as of December 31, 2017.

Thanks to the work of 162 full-time employees in 14 offices in AL, the bank has amassed loans and leases worth $364.8 million, including $294.1 million worth of real estate loans. U.S. bank customers currently have $489.1 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is essential. It works as a buffer against losses and affords protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, West Alabama Bank & Trust scored 16 out of a possible 30 points, beating the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. West Alabama Bank & Trust's Tier 1 capital ratio was 17.81 percent, higher than the 6 percent level considered adequate by regulators, 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 challenges.

Overall, West Alabama Bank & Trust held equity amounting to 13.24 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is 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.

Having a large number of these kinds of assets may eventually force a bank to use capital to absorb losses, cutting down on 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, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, West Alabama Bank & Trust scored 40 out of a possible 40 points, above the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.39 percent of West Alabama Bank & Trust'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 deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on West Alabama Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, West Alabama Bank & Trust scored 16 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for West Alabama Bank & Trust was 7.70 percent, below the national average of 8.10 percent.

The bank reported net income of $6.1 million on total equity of $79.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.01 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.