Safe and Sound

Sallie Mae Bank

Salt Lake City, UT
5
Star Rating
Started in 2005, Sallie Mae Bank is an FDIC-insured bank headquartered in Salt Lake City, UT. Regulatory filings show the bank having equity of $2.35 billion on assets of $21.65 billion, as of December 31, 2017.

Thanks to the work of 1,577 full-time employees, the bank currently holds loans and leases worth $18.57 billion, including real estate loans of $0. The bank currently holds $16.00 billion in deposits from U.S. customers.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is a valuable measurement of a bank's financial fortitude. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Sallie Mae Bank received a score of 12 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Sallie Mae Bank's Tier 1 capital ratio was 11.86 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Sallie Mae Bank held equity amounting to 10.87 percent of its assets, which was lower than 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 unpaid loans.

A bank with extensive holdings of these types of assets may eventually be forced to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the chances of a failure in the future.

Sallie Mae Bank scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.68 percent of Sallie Mae 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 1.01 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Sallie Mae Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Sallie Mae Bank scored 22 out of a possible 30, above the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Sallie Mae Bank's most recent annualized quarterly return on equity was 14.50 percent, above the national average of 8.10 percent.

The bank earned net income of $317.3 million on total equity of $2.35 billion for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.60 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.