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SAFE & SOUND® STAR RATINGS™

BEAL BANK USA

1970 VILLAGE CENTER CIRCLE, SUITE 1
LAS VEGAS, Nevada 89134

STAR RATING:
4starstarstarstar

Predictive Indicator neutral
As of March 31, 2016
Federal Reserve System Identifier 3284397


HOLDING COMPANY INFORMATION

(Based on data from the previous quarter.)

Holding company data is in thousands and percent. Zero assets indicates that the data is not reported.

Holding company information

High Holder Ownership Assets Equity Equity to Assets Net Income
BEAL FINANCIAL CORPORATIONwholly-owned

Please click on the holding company link to check the ratings of any affiliated institutions whose conditions could impact the bank about which you have inquired.

INTRODUCTION

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 59% 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 http://projects.propublica.org/bailout/list/index."

INSTITUTIONAL HIGHLIGHTS
Institution Name BEAL BANK USA
Report Date March 31, 2016
Report Period 3 months
Star Composite Rating, Percentile Rank 4 /29.30
Predictive Indicator neutral
Earnings Rating, Percentile Rank 3 /59.57
Asset Quality Rating, Percentile Rank 3 /10.78
Capital Rating, Percentile Rank 5 /93.43
Liquidity Rating, Percentile Rank 3 /6.91
Institution Asset Size 4.9971 billion
Deposits 2.626 billion
Loans 3.1007 billion
Equity 1.7218 billion
Net Profit/Loss 32.529 million

COMPONENT HIGHLIGHTS

Component star rating: 3 starstarstar
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 Equity-5.61Substantially Below Average
Net Interest Margin7.59Strong
Level of Non-interest Income (1)0.32Substantially Below Normal
Overhead (1)2.01Well Below Standard
(1) = As a percentage of average assets
Note: All ratios are based on the latest four quarters of income and expense

Component star rating: 3 starstarstar
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)29.81Higher Than Standard
Loss Reserve Coverage (3)23.79Substantially Below Normal
Loan Yield7.10Conservative
Asset Growth Rate-8.30Below Normal
(2) = Nonperforming Assets/Equity plus Loss Reserves
(3) = Loan Loss Reserves/Nonperforming Loans

Component star rating: 5 starstarstarstarstar
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 Assets34.46Well Above Peer Norm
Regulatory Capital Ratio33.49Substantially Exceeded Requirement

Component star rating: 3 starstarstar
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 Liquidity17.35Better Than Normal
Purchased Liabilities47.83Greater Than Average 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:

  • Non-Interest Income
  • Commercial and Industrial Loans
  • Brokered Deposits
  • Purchased Liabilities

Institution Commentary

OVERVIEW of Institution
Organized in 2004, BEAL BANK USA, which, as of March 31, 2016, reported $4.9971 billion in total assets. At that date, loans and deposits held by the bank amounted to $3.1007 billion and $2.626 billion, respectively. The bank's March 31, 2016 equity base of $1.7218 billion produced an Equity/Assets ratio of 34.46%, as of that date.

COMPOSITE SUMMARY
Bankrate believes that, as of March 31, 2016, this bank exhibited a sound condition, characterized by approximately normal overall, sustainable profitability, satisfactory asset quality, very strong capitalization and near normal liquidity.

EARNINGS ANALYSIS
For the twelve months ended March 31, 2016, the bank recorded a net loss of $-102,591 thousand. The bank experienced a return on average assets (ROA) of -2.07% over the latest four quarters. Year earlier twelve month results amounted to a net income of $337.894 million, or a 6.18% 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 2016 was approximately 0.95% for commercial banks and 1.25% for thrift institutions.

We have concluded that for the four quarters ending March 31, 2016, the bank achieved substantially below average return on equity , and, as noted, sustained an actual loss for that period . We deem net interest margin to have been strong. Noninterest income was substantially below normal, and management should be questioned as to the outlook for this source of revenue. We also observed overhead ratios that were well below standard, a sign of strict expense control. Importantly, net interest margins, noninterest income components, and overhead expense levels represent operating factors that combine to impact overall operating results.

ASSET QUALITY ANALYSIS
The bank revealed, as previously stated, satisfactory 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 higher than standard March 31, 2016 nonperforming asset ratio, substantially below 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.

Other asset categories, such as farm and consumer loans, which may carry more than usual default potential, should not have a substantial negative impact upon future results.

We do advise, due to reported levels of business lending, a review of commercial loan underwriting and administrative practices.

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.

CAPITAL ANALYSIS
For the one year period ended March 31, 2016, the bank reported a substantially below normal rate of growth in equity capital. Balance sheet structural changes, through the one year period of time ended March 31, 2016, have possibly had a negative impact upon 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 very strong capitalization. We have calculated the bank's March 31, 2016 Total Risk-Based Capital position, a computation used by industry regulators, and have concluded that this bank substantially exceeded the requirement, set by regulation, for this test.

LIQUIDITY ANALYSIS
As of March 31, 2016, the bank displayed Better Than Normal balance sheet liquidity and a Greater Than Average 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.

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" are almost certain to have a substantial impact upon future net worth of the bank.

INSTITUTION SUMMARY
This bank has been rated sound.

Positive factors that impacted that rating follow:

  • Capitalization

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

  • Non-Interest Income
  • Commercial and Industrial Loans
  • Brokered Deposits
  • Purchased Liabilities

PREDICTIVE INDICATOR
As stated, we have determined a composite Star rating for this bank of 4 starstarstarstar , 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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