Safe and Sound

Bofi Federal Bank

San Diego, CA
5
Star Rating
San Diego, CA-based Bofi Federal Bank is an FDIC-insured bank started in 2000. The bank has equity of $872.6 million on $8.91 billion in assets, according to December 31, 2017, regulatory filings.

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 has amassed loans and leases worth $7.91 billion, $6.84 billion of which are for real estate.

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 an analysis of how the bank fared on the three key criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors during periods of economic trouble for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is useful. When looking at safety and soundness, more capital is preferred.

Bofi Federal Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.19.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Bofi Federal Bank's Tier 1 capital ratio was 14.48 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.67 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Bofi Federal Bank held equity amounting to 9.79 percent of its assets, which was lower than the national average of 12.04 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

A bank with large numbers of these types of assets could eventually be forced to use capital to cover losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a future failure.

Bofi Federal Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.70.

A handy 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 -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.14 percent.

Banks maintain a reserve to handle troubled 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 Bofi Federal Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. However, 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, beating out the national average of 16.06.

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

For the twelve months ended December 31, 2017, the bank recorded net income of $150.8 million on total equity of $872.6 million. 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.