BMW Bank of North America

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.