Safe and Sound

USAA Federal Savings Bank

San Antonio, TX
4
Star Rating
USAA Federal Savings Bank is an FDIC-insured bank started in 1983 and currently headquartered in San Antonio, TX. Regulatory filings show the bank having equity of $7.04 billion on assets of $80.56 billion, as of June 30, 2017.

Thanks to the work of 7,295 full-time employees, the bank has amassed loans and leases worth $46.82 billion, $7.33 billion of which are for real estate. The bank currently holds $72.00 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, USAA Federal Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is important. It works as a buffer against losses and provides protection for depositors when a bank is experiencing economic instability. When looking at safety and soundness, the more capital, the better.
USAA Federal Savings Bank fell below the national average of 13.38 on our test to measure the adequacy of a bank's capital, achieving a score of 8 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. USAA Federal Savings Bank's Tier 1 capital ratio was 13.41 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, USAA Federal Savings Bank held equity amounting to 8.73 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

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

Having a large number of these types of assets could eventually require a bank to use capital to cover 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, resulting in depressed earnings and potentially more risk of a future failure.

USAA Federal Savings Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.62.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.82 percent of USAA Federal Savings 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 1.04 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve 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 USAA Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses lessen a bank's ability to do those things.

USAA Federal Savings Bank outperformed the average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for USAA Federal Savings Bank was 11.87 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $408.9 million on total equity of $7.04 billion. The bank experienced an annualized return on average assets, or ROA, of 1.02 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 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.