Safe and Sound

Arizona Bank & Trust

Phoenix, AZ
4
Star Rating
Arizona Bank & Trust is an FDIC-insured bank started in 2003 and currently based in Phoenix, AZ. Regulatory filings show the bank having equity of $63.1 million on assets of $566.3 million, as of June 30, 2017.

U.S. bank customers have $493.4 million on deposit at 9 offices in AZ run by 86 full-time employees. With that footprint, the bank has amassed loans and leases worth $372.9 million, including real estate loans of $260.1 million.

Overall, Bankrate believes that, as of June 30, 2017, Arizona Bank & Trust exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank faired on the three major 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 resilience, capital is essential. It acts as a bulwark against losses and as protection for depositors when a bank is experiencing financial trouble. When it comes to safety and soundness, the more capital, the better.
Arizona Bank & Trust came in below the national average of 13.38 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Arizona Bank & Trust's Tier 1 capital ratio was 13.88 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Arizona Bank & Trust held equity amounting to 11.14 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

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

Having large numbers of these kinds of assets suggests a bank could have to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Arizona Bank & Trust scored 32 out of a possible 40 points, failing to reach the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, 2.40 percent of Arizona Bank & Trust's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a widely used 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 Arizona Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Arizona Bank & Trust exceeded the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Arizona Bank & Trust's most recent annualized quarterly return on equity was 8.19 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $2.6 million on total equity of $63.1 million. The bank reported an annualized return on average assets, or ROA, of 0.89 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.