Safe and Sound

John Deere Financial, f.s.b.

Madison, WI
5
Star Rating
Madison, WI-based John Deere Financial, f.s.b. is an FDIC-insured bank founded in 2000. Regulatory filings show the bank having equity of $543.7 million on assets of $2.86 billion, as of December 31, 2017.

With 190 full-time employees, the bank currently holds loans and leases worth $2.80 billion, including real estate loans of $0. U.S. bank customers currently have $946.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, John Deere Financial, f.s.b. exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did 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 is an essential measurement of a bank's financial resilience. It works as a buffer against losses and affords protection for depositors during periods of economic trouble for the bank. When it comes to safety and soundness, more capital is better.

John Deere Financial, f.s.b. achieved a score of 30 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. John Deere Financial, f.s.b.'s Tier 1 capital ratio was 18.34 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, John Deere Financial, f.s.b. held equity amounting to 19.03 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

Having lots of these types of assets could eventually require a bank to use capital to cover losses, reducing its equity cushion. 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 reduced earnings and potentially more risk of a failure in the future.

John Deere Financial, f.s.b. exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.13 percent of John Deere Financial, f.s.b.'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 to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on John Deere Financial, f.s.b.'s loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

John Deere Financial, f.s.b. received above-average marks on Bankrate's test of earnings, achieving a score of 26 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for John Deere Financial, f.s.b. was 17.65 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $90.6 million on total equity of $543.7 million. The bank had an annualized return on average assets, or ROA, of 3.05 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.