Safe and Sound

Bofi Federal Bank

San Diego, CA
5
Star Rating
Bofi Federal Bank is an FDIC-insured bank founded in 2000 and currently headquartered in San Diego, CA. As of December 31, 2017, the bank held equity of $872.6 million on assets of $8.91 billion.

U.S. bank customers have $7.45 billion on deposit at 2 offices in multiple states run by 711 full-time employees. With that footprint, the bank holds loans and leases worth $7.91 billion, including real estate loans of $6.84 billion.

Overall, Bankrate believes that, as of December 31, 2017, Bofi Federal Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is key. It works as a buffer against losses and provides protection for accountholders when a bank is experiencing financial trouble. From a safety and soundness perspective, the more capital, the better.

Bofi Federal Bank finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Bofi Federal Bank's Tier 1 capital ratio was 14.48 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, Bofi Federal Bank held equity amounting to 9.79 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these kinds of assets could eventually have to use capital to cover losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

Bofi Federal Bank did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

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, 0.38 percent of Bofi Federal Bank's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bofi Federal Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

Bofi Federal Bank scored 26 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Bofi Federal Bank was 18.80 percent, above the national average of 8.10 percent.

The bank reported net income of $150.8 million on total equity of $872.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.76 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.