DBRS Confirms Escrow Bank USA at AA (high)
Banking OrganizationsDominion Bond Rating Service (“DBRS”) has today confirmed the ratings of Escrow Bank USA (“Escrow Bank” or the “Company”) as indicated above. All trends are Stable.
Escrow Bank has a narrow, stable, and low-risk business model. Operations are totally in the fiduciary areas of accepting deposits for escrow accounts and providing custody services to the commercial mortgage industry. DBRS states that as long as the appropriate policies, procedures, and expertise are in place, these are considered to be low-risk activities. Almost all client assets are held off-balance-sheet in trust accounts; Escrow Bank does not lend; capital ratios are exceptional; liquidity is favorable; and risk management is strong in all areas.
The rating of the ultimate parent, General Motors Acceptance Corporation (“GMAC”) and General Motors Corporation (“GM”), are not considered major factors in Escrow Bank’s ratings, despite the lack of any legal ringfencing. Escrow Bank is a small, regulated entity that was created to provide essential and highly reliable services to the mortgage operations of GMAC Commercial Mortgage Corporation. This business model is only viable if the Company manages its institution in a safe, sound, and low-risk framework that is worthy of a minimum AA ratings level. According to DBRS, even in a stress scenario for an entity in the GM group, there is no practical reason for the model to be disrupted by the ownership.
On August 5, 2005, GMAC announced the sale of a 60% equity interest in GMAC Commercial Holding Corp. (“GMACCH”) – Escrow Bank’s direct parent – to an investor group comprising Kohlberg Kravis Roberts & Co., Five Mile Capital Partners, and Goldman Sachs Capital Partners. While the sale is expected to close before year-end 2005, DBRS does not anticipate any significant changes in Escrow Bank’s corporate mission and it may even be the beneficiary of increased business volumes from new ownership relationships. Changes are expected in the composition of the board of directors to reflect the new ownership interests.
The ratings recognize a number of modest inherent risks that Escrow Bank faces in certain fiduciary, legal, and operational aspects of its businesses. DBRS believes that Escrow Bank is strong in policies and procedures, as well as governance-related areas. There is a high and ongoing level of review from both internal and external auditing and regulatory organizations – including the Federal Deposit Insurance Corporation (“FDIC”) and the State of Utah.
Headquartered in Salt Lake City, Escrow Bank USA is a Utah-chartered Industrial Bank specializing in accepting deposits for escrow accounts and providing document custody services to the commercial real estate industry, with over US$36 million in assets, US$30 million in equity, and nearly US$4 billion in trust assets as of September 30, 2005.
Note:
Ratings do not apply to the off-balance-sheet deposits held in trust.
Ratings
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