Safe and Sound

Commerce Bank of Arizona

Tucson, AZ
3
Star Rating
Started in 2002, Commerce Bank of Arizona is an FDIC-insured bank based in Tucson, AZ. As of December 31, 2017, the bank held equity of $22.1 million on $189.5 million in assets.

Thanks to the efforts of 42 full-time employees in 5 offices in AZ, the bank currently holds loans and leases worth $156.6 million, including real estate loans of $138.3 million. The bank currently holds $162.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Commerce Bank of Arizona exhibited a generally satisfactory condition, earning 3 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 grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is experiencing financial instability. Therefore, when it comes to measuring an a bank's financial fortitude, capital is crucial. When it comes to safety and soundness, more capital is better.

Commerce Bank of Arizona exceeded the national average of 13.13 points on our test to measure capital adequacy, scoring 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Commerce Bank of Arizona's Tier 1 capital ratio was 13.60 percent, exceeding 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 weather economic downturns.

Overall, Commerce Bank of Arizona held equity amounting to 11.64 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

Having a large number of these kinds of assets means a bank may have to use capital to absorb losses, diminishing 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, diminishing earnings and elevating the chances of a future failure.

Commerce Bank of Arizona scored 24 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.99 percent of Commerce Bank of Arizona'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 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a handy 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 Commerce Bank of Arizona's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

Commerce Bank of Arizona underperformed the average on Bankrate's test of earnings, achieving a score of 10 out of a possible 30.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Commerce Bank of Arizona's most recent annualized quarterly return on equity was 5.70 percent, below the national average of 8.10 percent.

The bank reported net income of $1.0 million on total equity of $22.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.54 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.