Safe & Sound » Bank Ratings » COMENITY CAPITAL BANK


SALT LAKE CITY, Utah 84121

4starstarstarstar G

Predictive Indicator neutral
As of December 31, 2015
Federal Reserve System Identifier 3224580


(Based on data from the previous quarter.)

This bank is not owned by a holding company.


U.S. commercial banks are chartered under either federal or state jurisdiction for the purposes of accepting funds for deposit and extending loans to either individual or business borrowers. Banks are subject to credit, interest rate, and operational risk, and, because of both their public purpose and their importance to the nation’s economy, banks become the object of intense regulatory scrutiny.

U.S. thrift institutions are chartered under either federal or state jurisdiction for the primary purpose of utilizing deposited funds to issue loans secured by real estate. Currently, real estate-backed loans account for approximately 42% of total thrift industry assets, and one-to-four family residential mortgages comprise nearly 60% of the industry’s real estate loan portfolio. Thrift institutions are subject to credit, interest rate, and operational risk, and, during the last twenty years, thrifts have made great strides toward reducing historic mismatches between asset and liability maturities.

The Bankrate proprietary commercial bank rating model analyzes capitalization, asset quality, earnings, and liquidity and produces composite and component "Star" ratings that can be used as a measure of the rated entity's financial safety and soundness. Additionally, early warning components of the model highlight operating characteristics of immediate concern and recommended follow-up actions. "The analyses are not adjusted for TARP funding and those institutions receiving funds may receive ratings that would differ were the TARP funds adjusted out of the analyses. You can check whether or not this institution has received TARP funding and whether or not they have paid it back at"

Report Date December 31, 2015
Report Period 1 year
Star Composite Rating, Percentile Rank 4 /44.91
Predictive Indicator neutral
Earnings Rating, Percentile Rank 5 /98.38
Asset Quality Rating, Percentile Rank 2 /7.12
Capital Rating, Percentile Rank 4 /75.16
Liquidity Rating, Percentile Rank 2 /0.77
Institution Asset Size 4.15 billion
Deposits 2.7658 billion
Loans 3.5538 billion
Equity 530.387 million
Net Profit/Loss 90.279 million


Component star rating: 5 starstarstarstarstar
Earnings Highlights

Bank profitability is critical to building capital, establishing adequate loss reserves, and providing dividends to shareholders.

Key Earnings information and ratios:Ratio (%)Assessment
Return on Equity19.76Very Healthy
Net Interest Margin17.48Strong
Level of Non-interest Income (1)4.07Solid
Overhead (1)9.06Significantly Higher Than Average
(1) = As a percentage of average assets
Note: All ratios are based on the latest four quarters of income and expense

Component star rating: 2 starstar
Asset quality highlights

Asset quality is a major determinant of the viability of any banking institution. Poor asset quality will have a very direct impact upon the other components and bank regulators invest substantial amounts of time and resources in gauging the quality of a bank's loans and investments.

Key Asset Quality information and ratios:Ratio (%)Assessment
Nonperforming Asset Ratio (2)12.04Somewhat Higher Than Standard
Loss Reserve Coverage (3)251.95Much Better Than Normal
Loan Yield19.77Conservative
Asset Growth Rate40.80High
(2) = Nonperforming Assets/Equity plus Loss Reserves
(3) = Loan Loss Reserves/Nonperforming Loans

Component star rating: 4 starstarstarstar
Capital highlights

Bank capitalization stands as a protection against loss for bank customers, creditors, shareholders, and the Federal Deposit Insurance Corporation (FDIC). Regulators place a high degree of importance upon assessments of capitalization and assign regulatory benchmarks as determinants of capital adequacy.

Key measures of Capital Adequacy:Ratio (%)Assessment
Net Worth to Total Assets12.78Above Peer Norm
Regulatory Capital Ratio14.27Exceeded Requirement

Component star rating: 2 starstar
Liquidity highlights

Liquidity provides funding for normal bank operations and represents a reserve for unanticipated disintermediation. Liquidity can be both an asset and a liability concept.

Key measures of Liquidity:Ratio (%)Assessment
Balance Sheet Liquidity7.38Substantially Below Normal
Purchased Liabilities84.03Seemingly Greater Than Prudent Dependence

Early warning highlights

Early warning indicators identify areas of potential concern, which may lead to financial deterioration and thus, require inquiry or in-depth investigation. For this bank we have noted:

  • Overhead
  • Consumer Loans
  • Asset Growth
  • Brokered Deposits
  • Purchased Liabilities

Institution Commentary

OVERVIEW of Institution
Organized in 2003, COMENITY CAPITAL BANK, which, as of December 31, 2015, reported $4.15 billion in total assets. At that date, loans and deposits held by the bank amounted to $3.5538 billion and $2.7658 billion, respectively. The bank's December 31, 2015 equity base of $530.387 million produced an Equity/Assets ratio of 12.78%, as of that date.

Bankrate believes that, as of December 31, 2015, this bank exhibited a sound condition, characterized by very solid overall, sustainable profitability, questionable asset quality, strong capitalization and lower than normal liquidity.

For the twelve months ended December 31, 2015, the bank recorded net income of $90.279 million. The bank experienced a return on average assets (ROA) of 2.76% over the latest four quarters. Year earlier twelve month results amounted to a net income of $99.852 million, or a 4.84% ROA over the most recent four quarters at that time. An ROA of at least 1.0% is deemed satisfactory in accordance with banking industry standards, and the industry's annualized ROA for the twelve months of 2015 was approximately 1.04% for commercial banks and 1.12% for thrift institutions.

We have concluded that for the four quarters ending December 31, 2015, the bank achieved a very healthy return on equity. We deem net interest margin to have been strong. Noninterest income was solid. We also observed overhead ratios that were significantly higher than average, and the composition of overhead should be thoroughly analyzed. Importantly, net interest margins, noninterest income components, and overhead expense levels represent operating factors that combine to impact overall operating results. We have also noted that the bank's profitability improvement between the twelve months ended December 31 , 2014 and the twelve months ended December 31 , 2015 well exceeded the banking industry peer comparison.

The bank revealed, as previously stated, questionable asset quality. Our conclusion with respect to asset quality incorporates our analysis of data depicting regional economic conditions as well as our computations of a somewhat higher than standard December 31, 2015 nonperforming asset ratio, much better than normal reserve coverage for nonperforming loans; and apparently acceptable quality, or no greater than average, holdings of commercial real estate and construction loans, two categories that can intensify credit risk.

The bank reveals a sizable portfolio of consumer loans. Credit card approvals should demonstrate the bank's determination that borrowers possess solid capacity to repay such obligations. Specifically, credit card administration and collection efforts should include steps for dealing with borrower violations of credit limitations, the monitoring of low monthly payments that result in negative amortization, the establishment of appropriate workout agreements, and the accurate reporting of credit card losses.

Loan yield can measure financial reward versus credit risk. Excessive loan yield may be an indicator of existing or future problems. Our loan review indicates that the bank has assumed a seemingly prudent position between credit risk and financial reward. Likewise, for banking institutions, substantially higher than normal asset growth can be deemed speculative and can lead to financial deterioration. This bank exhibits such growth which, if unrelated to merger activity, should be subject to further inquiry.

For the one year period ended December 31, 2015, the bank reported a strong rate of growth in equity capital. Balance sheet structural changes, through the one year period of time ended December 31, 2015, have somewhat improved the bank's capital position. Our analytical methodology does take into account the quantity, quality, and durability of net worth, and, as set forth above, we have determined, based upon our series of tests, that the bank demonstrates strong capitalization. We have calculated the bank's December 31, 2015 Total Risk-Based Capital position, a computation used by industry regulators, and have concluded that this bank exceeded the requirement, set by regulation, for this test.

As of December 31, 2015, the bank displayed Substantially Below Normal balance sheet liquidity and a Seemingly Greater Than Prudent Dependence upon wholesale, or non-core liabilities, which include all borrowings, such as Federal Home Loan Bank Advances, and CD's greater than $250,000. We do note a substantial dependence upon brokered deposits, another component of wholesale liabilities. Accordingly, an inquiry into funds acquisition strategies should be undertaken. The magnitude of credit card operations may give rise to the need to generate additional cash flow in order to fund new card balances.

Accounting principles require some securities to be categorized as "Available-for-Sale." Changes in market value of these securities are reflected through the GAAP (Generally Accepted Accounting Principles) net worth of the institution. Based upon the bank's present balance sheet, changes in the value of the current level of securities reported as "Available-for-Sale" might not have a substantial impact upon future net worth of the bank.

This bank has been rated sound.

Negative factors that impacted that rating follow:

  • Asset Quality
  • Liquidity

Positive factors that impacted that rating follow:

  • Earnings

As noted previously, early warning indicators, possibly requiring specific investigation include:

  • Overhead
  • Consumer Loans
  • Asset Growth
  • Brokered Deposits
  • Purchased Liabilities

As stated, we have determined a composite Star rating for this bank of 4 starstarstarstar G , indicative of a sound financial condition. At times, financial conditions of banks change rapidly and significantly. Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings. However, in view of early warning indicators set forth within this report, in combination with the institution's financial data, we believe that the Star rating for this institution is unlikely to change within the ensuing twelve month period.

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