Safe and Sound

BMW Bank of North America

Salt Lake City, UT
5
Star Rating
Salt Lake City, UT-based BMW Bank of North America is an FDIC-insured bank started in 1999. Regulatory filings show the bank having equity of $1.63 billion on $9.96 billion in assets, as of December 31, 2017.

Thanks to the efforts of 37 full-time employees, the bank holds loans and leases worth $7.39 billion, including real estate loans of $7.3 million. U.S. bank customers currently have $5.73 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, BMW Bank of North America exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial resilience. It works as a bulwark against losses and affords protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

BMW Bank of North America beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 24 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. BMW Bank of North America's Tier 1 capital ratio was 17.10 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, BMW Bank of North America held equity amounting to 16.34 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these types of assets may eventually be required to use capital to absorb losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the chances of a future failure.

BMW Bank of North America scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating the national average of 37.49.

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, 0.19 percent of BMW Bank of North America's loans were noncurrent -- in other words, 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 to deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on BMW Bank of North America's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's earnings test, BMW Bank of North America scored 18 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. BMW Bank of North America's most recent annualized quarterly return on equity was 9.11 percent, above the national average of 8.10 percent.

The bank recorded net income of $144.9 million on total equity of $1.63 billion for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.46 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.