Safe and Sound

Rock Canyon Bank

Provo, UT
5
Star Rating
Provo, UT-based Rock Canyon Bank is an FDIC-insured bank founded in 1991. Regulatory filings show the bank having equity of $36.6 million on assets of $396.7 million, as of December 31, 2017.

U.S. bank customers have $357.8 million on deposit at 5 offices in UT run by 113 full-time employees. With that footprint, the bank has amassed loans and leases worth $311.0 million, $241.8 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Rock Canyon Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders when a bank is experiencing financial instability. Therefore, a bank's level of capital is a key measurement of an institution's financial resilience. From a safety and soundness perspective, the higher the capital, the better.

Rock Canyon Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Rock Canyon Bank's Tier 1 capital ratio was 10.73 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Rock Canyon Bank held equity amounting to 9.23 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the risk of a future failure.

Rock Canyon Bank fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.17 percent of Rock Canyon 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 problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Rock Canyon 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. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses take away from a bank's ability to do those things.

Rock Canyon Bank outperformed the average on Bankrate's earnings test, achieving a score of 26 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Rock Canyon Bank was 17.97 percent, above the national average of 8.10 percent.

The bank reported net income of $6.1 million on total equity of $36.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.73 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.