Safe and Sound

Arrowhead Bank

Llano, TX
4
Star Rating
Arrowhead Bank is a Llano, TX-based, FDIC-insured bank started in 1923. As of December 31, 2017, the bank held equity of $16.8 million on $177.8 million in assets.

With 40 full-time employees in 5 offices in TX, the bank has amassed loans and leases worth $122.1 million, including real estate loans of $93.2 million. U.S. bank customers currently have $160.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Arrowhead Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial stability, capital is important. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Arrowhead Bank received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Arrowhead Bank's Tier 1 capital ratio was 14.82 percent, higher than 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 financial challenges.

Overall, Arrowhead Bank held equity amounting to 9.46 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually be forced to use capital to absorb losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the risk of a failure in the future.

On Bankrate's test of asset quality, Arrowhead Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.40 percent of Arrowhead Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Arrowhead Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

Arrowhead Bank outperformed the 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, essentially) by total equity, is one key measure of a bank's earnings. Arrowhead Bank's most recent annualized quarterly return on equity was 9.87 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.6 million on total equity of $16.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.91 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.