Tucson's community banks and credit unions maintained their financial stability in the third quarter, and some even saw their ratings rise, according to the latest ratings from BauerFinancial Inc.

Two Tucson-based credit unions, Pyramid Federal and Tucson Old Pueblo, saw their Bauer star ratings rise for the third quarter ended Sept. 30.

Phoenix-based Alliance Bank of Arizona was the only Arizona-based bank with a Tucson presence to see its rating rise. Alliance gained a half-star, moving to 31/2 stars, or "good," from three stars, or "adequate".

Bauer ratings remained unchanged for all other rated banks and credit unions based in Arizona or with significant Tucson operations. Bauer's star ratings are based on the ratio of capital to risk-weighted assets and other factors.

Pyramid's rating rose to four stars ("excellent") from three stars ("good"), as it posted net income of $77,000 in the third quarter. The credit union's nonperforming assets, such as delinquent loans, comprised less than 1 percent of its assets.

Pyramid President and CEO Ray Lancaster said the 8,000-member credit union shored up its capital with an infusion of $2.5 million in so-called secondary capital under the Community Development Capital Initiative, a low-interest loan program funded under the federal Troubled Asset Relief Program (TARP).

Lancaster said the infusion boosted lending resources and helped push Pyramid's capital ratio to 11 percent, up from about 8 percent the prior quarter and comfortably above the 6 percent considered adequate by regulators.

Despite the third-quarter profit, Lancaster said he doesn't expect Pyramid - founded by postal workers in 1929 - to turn a profit for the full year. That's partly because the credit union added $750,000 to its reserves earlier this year to cover potential losses on real-estate loans, he said.

Tucson Old Pueblo Credit Union earned another star but still is rated only two stars, or "problematic." The credit union, founded in 1935 to serve Tucson city employees, reported net income of $832,000 in the third quarter with 2.9 percent nonperforming assets. Tucson Old Pueblo President and CEO Joe Mirachi said the improved rating resulted partly from an increase in the credit union's capital ratio to above the 6 percent adequacy benchmark, to 6.39 percent.

Tucson Old Pueblo's financial position has improved as the company has worked through problems with delinquent auto loans, Mirachi said. He said he expects the 15,500-member credit union to post net income of about $1 million for 2010.

Vantage West Credit Union - the biggest Tucson-based credit union with more than $1 billion in assets - kept its four-star ("excellent") Bauer rating, though it posted a net loss of about $1.5 million in the third quarter.

Commerce Bank of Arizona maintained its five-star rating, the highest among Tucson-based banks and among only a handful of Arizona-based banks to hold that rating.

Meanwhile, Bank of Tucson and Southern Arizona Community Bank held their three-star ratings, as they head toward a merger expected to be finalized in early 2011.

Go inside the numbers / D6

Contact Assistant Business Editor David Wichner at dwichner@azstarnet.com or 573-4181.